SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
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ZIXIT CORPORATION
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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--------
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[LOGO] ZIXIT
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ZIXIT CORPORATION
2711 North Haskell Avenue
Suite 2300, LB 36
Dallas, Texas 75204-2960
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held Monday, July 29, 2002
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We will hold this year's annual stockholders' meeting on Monday, July 29,
2002, at 9:00 a.m. (registration to begin at 8:30 a.m.), Central time. We will
hold the meeting at the CityPlace Conference Center, Houston Room, 2711 North
Haskell Avenue, Second Floor, Dallas, Texas 75204. At the meeting, we will ask
you to consider and vote on the following proposals:
. a proposal to elect David P. Cook, Michael E. Keane, James S. Marston,
John A. Ryan, Antonio R. Sanchez, Jr. and Dr. Ben G. Streetman as members
of our Board of Directors;
. a proposal to amend our Articles of Incorporation to change our name to
"Zix Corporation";
. a proposal to increase the number of shares of our common stock available
for grant under our 2001 Stock Option Plan from 850,000 to 1,500,000
shares; and
. a proposal to increase the number of shares of our common stock available
for grant under our 1999 Directors' Stock Option Plan from 750,000 to
975,000 shares.
We will also discuss and take action on any other business that is properly
brought before the meeting or any adjournment thereof. If you were a
stockholder at the close of business on May 31, 2002, you are entitled to
notice of, and to vote at, the meeting or any adjournment thereof. The stock
transfer books will not be closed.
We would like you to attend the meeting, but understand that you may not be
able to do so. For your convenience, and to ensure that your shares are
represented and voted according to your wishes, we have enclosed a proxy card
for you to use. Please vote, sign and date the proxy card and return it to us
as soon as possible. We have provided you with a postage-paid envelope to
return your proxy card. If you attend the meeting, you may revoke your proxy
and vote in person. We look forward to hearing from you.
By Order of the Board of Directors,
Ronald A. Woessner
Senior Vice President, General
Counsel & Secretary
Dallas, Texas
June 10, 2002
YOUR VOTE IS IMPORTANT.
Please vote early even if you plan to attend the annual meeting.
TABLE OF CONTENTS
QUESTIONS AND ANSWERS:
Why did I receive this proxy statement?......................................... 1
I may have received more than one proxy statement. Why?......................... 1
What will occur at the annual meeting?.......................................... 1
How many votes are necessary to elect the nominees for director?................ 1
How many votes are necessary to approve the adoption of the amendments to ZixIt
Corporation's Articles of Incorporation, 2001 Stock Option Plan and 1999
Directors' Stock Option Plan?................................................. 2
What if a nominee is unwilling or unable to stand for election?................. 2
How do I vote if I am not planning to attend the annual meeting?................ 2
What if I want to change my vote?............................................... 2
How do I raise an issue for discussion or vote at the annual meeting?........... 2
What if my shares are in a brokerage account and I do not vote?................. 3
How are abstentions treated?.................................................... 3
How much will this solicitation cost, and who will pay for it?.................. 3
Where can I find the voting results of the annual meeting?...................... 3
MORE ABOUT THE PROPOSALS:
Proposal 1: Election of Directors................................................ 4
Proposal 2: Amendment to ZixIt Corporation's Articles of Incorporation........... 4
Proposal 3: Amendment to ZixIt Corporation's 2001 Stock Option Plan.............. 5
Proposal 4: Amendment to ZixIt Corporation's 1999 Directors' Stock Option Plan... 7
OTHER INFORMATION YOU NEED TO MAKE AN INFORMED DECISION:
Who are our directors, executive officers and significant employees?............ 9
How much stock do our principal stockholders, directors and executive officers
own?.......................................................................... 12
Section 16(a) Beneficial Ownership Reporting Compliance......................... 13
How do our Board and its committees work?....................................... 13
Compensation of Directors and Executive Officers:
Summary Compensation Table................................................... 15
Option Grants in 2001 to Named Executive Officers............................ 16
Aggregated Option Exercises in 2001 and Year-end Option Values............... 16
Non-Stockholder Approved Equity Compensation Arrangements.................... 17
Employment and Severance Agreements with Certain Executive Officers.......... 18
How are our Board members paid?.............................................. 18
Certain Relationships and Related Transactions............................... 19
Compensation Committee Interlocks and Insider Participation.................. 19
Report of Board of Directors on Executive Compensation....................... 20
Stock Price Performance Graph................................................ 22
Report of the Audit Committee of the Board of Directors......................... 23
QUESTIONS AND ANSWERS
Why did I receive this proxy statement?
On or about June 10, 2002, we will begin mailing this proxy statement and
accompanying proxy card to everyone who was a stockholder of our company at the
close of business on May 31, 2002. We prepare a proxy statement each year to
let our stockholders know when and where we will hold our annual stockholders'
meeting. This proxy statement:
. includes information about the matters that will be discussed and voted on
at the meeting, and
. provides you with updated information about our company.
I may have received more than one proxy statement. Why?
If you received more than one proxy statement, your shares are probably
registered differently or are in more than one account. Please vote each proxy
card that you received.
What will occur at the annual meeting?
First, we will determine whether enough stockholders are present at the
meeting to conduct business. A stockholder will be deemed to be "present" at
the meeting if the stockholder:
. is present in person, or
. is not present in person but has voted by proxy card prior to the meeting.
All stockholders of record at the close of business on May 31, 2002 will be
entitled to vote on matters presented at the meeting or any adjournment
thereof. The holders of a majority, or 8,837,344, of the shares of our common
stock entitled to vote at the meeting must be represented at the meeting in
person or by proxy to have a quorum for the transaction of business at the
meeting and to act on the matters specified in the Notice. If holders of fewer
than 8,837,344 shares are present at the meeting, we will adjourn or reschedule
the meeting. Under our Articles of Incorporation, for each share of common
stock that you owned at the close of business on May 31, 2002, you are entitled
to one vote on all matters brought before the meeting or any adjournment
thereof.
After each proposal has been voted on at the meeting, we will discuss and
take action on any other matter that is properly brought before the meeting.
Our transfer agent, Computershare Investor Services, LLC, will count the votes
and act as inspector of election.
A representative of Ernst & Young LLP (we refer to it as "Ernst & Young"),
our independent auditors, is expected to be present at the annual meeting and
will be afforded an opportunity to make a statement, if such representative so
desires, and to respond to appropriate questions.
If enough stockholders are present at the meeting to conduct business, then
we will vote on the proposals outlined in this proxy statement and any other
business that is properly brought before the meeting and any adjournments
thereof.
We know of no other matters that will be presented for consideration at the
annual meeting. If, however, other matters or proposals are presented and
properly come before the meeting, the proxy holders intend to vote all proxies
in accordance with their best judgment in the interest of ZixIt Corporation and
our stockholders.
How many votes are necessary to elect the nominees for director?
At the close of business on May 31, 2002, there were 17,674,687 shares of
our common stock issued and outstanding and entitled to vote. The six nominees
receiving the highest number of "yes" votes will be elected as directors. This
number is called a "plurality."
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Votes that are withheld from any director nominee will be counted in
determining whether a quorum has been reached but will not affect the outcome
of the vote. Assuming a quorum is present, the affirmative vote of a
"plurality" of the shares of common stock voted and entitled to vote for the
election of directors is required for the election of directors. Votes may be
cast in favor of, or withheld from, a director nominee.
In the election of directors, stockholders are not entitled to cumulate
their votes or to vote for a greater number of persons than the number of
nominees named in this proxy statement.
How many votes are necessary to approve the adoption of the amendments to ZixIt
Corporation's Articles of Incorporation, 2001 Stock Option Plan and 1999
Directors' Stock Option Plan?
The affirmative vote of at least two-thirds of the outstanding shares of our
common stock is required to approve the amendment to our Articles of
Incorporation to change our name to "Zix Corporation." The affirmative vote of
a majority of the shares of our common stock represented at the annual meeting
and entitled to vote, if a quorum is present, is required to approve the
adoption of the proposed amendments to our 2001 Stock Option Plan and 1999
Directors' Stock Option Plan. The same vote is generally required for action on
any other matters that properly come before the meeting.
What if a nominee is unwilling or unable to stand for election?
Each of the persons nominated for election to our Board of Directors has
agreed to stand for election. However, should any nominee become unable or
unwilling to accept nomination or election, no person will be substituted in
his stead. The Board of Directors, in accordance with our Restated Bylaws, will
by resolution reduce the number of members of our Board accordingly. Our Board
of Directors has no reason to believe that any of the nominees will be unable
or unwilling to serve if elected, and to the knowledge of the Board, each of
the nominees intends to serve the entire term for which election is sought.
How do I vote if I am not planning to attend the annual meeting?
In addition to voting in person at the meeting, you may mark your selections
on the enclosed proxy card, date and sign the card and return the card in the
enclosed postage-paid envelope.
Please understand that voting by any means other than voting in person at
the meeting has the effect of appointing John A. Ryan, our Chairman, President
and Chief Executive Officer, and Steve M. York, our Senior Vice President,
Chief Financial Officer and Treasurer, as your proxies. They will be required
to vote on the proposals described in this proxy statement exactly as you have
voted. However, if any other matter requiring a stockholder vote is properly
raised at the meeting, then Messrs. Ryan and York will be authorized to use
their discretion to vote on such issues on your behalf.
We encourage you to vote now even if you plan to attend the annual meeting
in person. If your shares are in a brokerage account, you may receive different
voting instructions from your broker.
What if I want to change my vote?
You may revoke your vote on a proposal at any time before the annual meeting
for any reason. To revoke your proxy before the meeting, write to our
Secretary, Ronald A. Woessner, at 2711 North Haskell Avenue, Suite 2300, LB 36,
Dallas, Texas 75204-2960. You may also come to the meeting and change your vote
in writing.
How do I raise an issue for discussion or vote at the annual meeting?
If you would like to submit a proposal to be included in next year's proxy
statement, you must submit your proposal in writing so that we receive it no
later than February 10, 2003. We will include your proposal in our
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next annual proxy statement if it is a proposal that we would be required to
include in our proxy statement pursuant to the rules of the Securities and
Exchange Commission (we refer to it as the "SEC"). Under Rule 14a-8 of the
Securities Exchange Act of 1934, as amended, proposals of stockholders must
conform to certain requirements as to form and may be omitted from the proxy
materials under certain circumstances. To avoid unnecessary expenditures of
time and money, you are urged to review this rule and, if questions arise,
consult legal counsel prior to submitting a proposal to us. Proposals should be
directed to our Secretary, Ronald A. Woessner, at our principal executive
offices at 2711 North Haskell Avenue, Suite 2300, LB 36, Dallas, Texas
75204-2960.
Where a stockholder has appropriately specified how a proxy is to be voted,
it will be voted accordingly, and where no specific direction is given on a
properly executed proxy card, it will be voted FOR adoption of the proposals
set forth in this proxy statement. The proxy holders will have discretion to
vote on any matter properly proposed to come before the meeting that was not
brought to our attention by February 18, 2002.
What if my shares are in a brokerage account and I do not vote?
If your shares are in a brokerage account and you do not vote, your
brokerage firm could:
. vote your shares, if it is permitted by the rules of NASDAQ, or
. leave your shares unvoted.
Under applicable rules, brokers who hold shares in street name have the
authority to vote in favor of all matters specified in the Notice, if they do
not receive contrary voting instructions from beneficial owners. Under
applicable law, if a broker has not received voting instructions with respect
to certain shares and gives a proxy for those shares, but does not vote the
shares on a particular matter, those shares will not affect the outcome of the
vote with respect to that matter. Such broker non-votes will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business, but will not be counted for purposes of determining the number of
votes cast with respect to a proposal. A broker non-vote will not affect the
outcome of the voting on any proposals other than the proposal to amend the
ZixIt Corporation Articles of Incorporation. A broker non-vote will have the
effect of a "no" vote on that proposal.
How are abstentions treated?
Any stockholder that is present at the meeting, either in person or by
proxy, but who abstains from voting, will still be counted for purposes of
determining whether a quorum exists. An abstention will not be counted as an
affirmative or negative vote in the election of the directors. With respect to
all other matters, an abstention would have the same effect as a vote against
the proposal. Our stockholders have no appraisal rights under Texas law with
respect to the proposals specified in the Notice. If you sign your proxy card
but do not specify how you want to vote on a proposal, then your shares will be
voted FOR that proposal.
How much will this solicitation cost, and who will pay for it?
We will bear the cost of solicitation of proxies, including the cost of
preparing, printing and mailing proxy materials, and the cost of reimbursing
brokers for forwarding proxies and proxy statements to their principals. We
have engaged Georgeson Shareholder to assist in the solicitation of proxy
materials from stockholders at a fee of approximately $5,500 plus reimbursement
of reasonable out-of-pocket expenses. Proxies may also be solicited without
extra compensation by our officers and employees by telephone or otherwise.
Arrangements may also be made with brokerage houses and other custodians,
nominees and fiduciaries for the forwarding of proxy solicitation material to
beneficial owners of shares of our common stock, and we may reimburse them for
reasonable out-of-pocket expenses incurred by them.
Where can I find the voting results of the annual meeting?
We will announce the voting results at the meeting and will publish the
results in our quarterly report on Form 10-Q for the second quarter of 2002
ending on June 30, 2002. We will file that report with the SEC by mid-August of
this year, and you can get a copy by contacting either our Investor Relations
office at (214) 515-7357 or the SEC at (800) SEC-0330 or http://www.sec.gov.
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MORE ABOUT THE PROPOSALS
PROPOSAL 1
ELECTION OF DIRECTORS
We will vote on the election of six members of our Board of Directors at the
annual meeting. Each director serves until the next annual meeting of
stockholders and until the director's successor is duly elected and qualified,
unless earlier removed in accordance with our Restated Bylaws. Officers serve
at the discretion of our Board of Directors.
The nominees for election to our Board are David P. Cook, Michael E. Keane,
James S. Marston, John A. Ryan, Antonio R. Sanchez, Jr. and Dr. Ben G.
Streetman.
Name (1) Principal Occupation Director Since
-------- -------------------- --------------
David P. Cook Founder, ZixIt Corporation 1995(2)
Michael E. Keane Senior Vice President and Chief Financial Officer, 1997
UNOVA, Inc.
James S. Marston Private Investor 1991
John A. Ryan Chairman, President and Chief Executive Officer, ZixIt 2001
Corporation
Antonio R. Sanchez, Jr. Chairman and Chief Executive Officer, Sanchez Oil & 1993
Gas Corporation
Dr. Ben G. Streetman Dean, College of Engineering at The University of Texas 1998
at Austin
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(1) For biographical and other information regarding the nominees for director,
please see "Who are our directors, executive officers and significant
employees?" below.
(2) Mr. Cook also served on our Board of Directors from 1984 to 1990.
OUR BOARD OF DIRECTORS URGES YOU TO VOTE FOR EACH OF THE NOMINEES FOR
DIRECTOR SET FORTH ABOVE.
PROPOSAL 2
AMENDMENT TO ZIXIT CORPORATION'S ARTICLES OF INCORPORATION
We have a suite of secure messaging products and services that use the "Zix"
prefix--ZixVPM, ZixBlast and ZixMail. Accordingly, we propose to amend our
Articles of Incorporation to formally change our name to "Zix Corporation." We
believe that the proposed name is preferable to our current name since we are
using the "Zix" prefix to promote our products and services. If this proposal
is approved by our stockholders, an amendment to our Articles of Incorporation
will be filed to effect the name change as promptly as practicable. After the
name change, our shares of common stock will continue to trade on NASDAQ under
the symbol "ZIXI."
OUR BOARD OF DIRECTORS URGES YOU TO VOTE FOR THE ADOPTION OF THE PROPOSED
AMENDMENT TO ZIXIT CORPORATION'S ARTICLES OF INCORPORATION.
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PROPOSAL 3
AMENDMENT TO ZIXIT CORPORATION'S 2001 STOCK OPTION PLAN
We have adopted an amendment to our 2001 Stock Option Plan (we refer to it
as the "2001 Plan"), subject to approval by our stockholders. The amendment
increases the maximum number of shares of our common stock with respect to
which options may be granted under the 2001 Plan from 850,000 to 1,500,000. As
of April 30, 2002, the aggregate market value of the shares covered by the
amendment was $3,224,000.
A copy of the 2001 Plan, as amended and restated after giving effect to the
amendment, is attached to this proxy statement as APPENDIX A. From inception of
the 2001 Plan through April 30, 2002, (i) all current executive officers, as a
group, were granted 275,000 options; (ii) all current directors who are not
executive officers were not eligible to receive options and (iii) all
employees, including all current officers who are not executive officers, as a
group, were granted 438,500 options under the 2001 Plan. No option grants have
been made under the 2001 Plan out of the 650,000 additional shares reserved
under the 2001 Plan that stockholders are being asked to approve. The number of
option grants to be made in the future to the foregoing individuals or groups
of individuals, and the prices at which such grants will be made, are not
determinable. The following summary of certain provisions of the 2001 Plan is
qualified in its entirety by reference to the full text of the 2001 Plan.
Summary
Our Board of Directors believes that the proposed amendment to the 2001 Plan
is in the best interest of ZixIt Corporation and its stockholders and is
necessary to enable us to attract and retain highly qualified personnel. The
affirmative vote of a majority of the shares of our common stock represented at
the annual meeting and entitled to vote, if a quorum is present, is required to
approve the adoption of the proposed amendment to the 2001 Plan.
Administration
The 2001 Plan is administered by our Board of Directors and the Board's
Compensation and Stock Option Committee (either, the "committee"). The
committee is authorized to grant awards in the form of stock options and to
determine the terms and conditions relating to such options. The committee has
complete authority to construe, interpret and administer the provisions of the
2001 Plan and the provisions of the agreements governing options granted
thereunder. The committee has the authority to prescribe, amend and rescind
rules and regulations pertaining to the 2001 Plan and to make all other
determinations necessary or deemed advisable in the administration of the 2001
Plan. The determinations and interpretations made by the committee are final
and conclusive.
Eligibility
Eligibility to participate in the 2001 Plan is limited to our employees and
non-employee consultants and advisors and our subsidiaries' employees and
non-employee consultants and advisors, as selected by the committee. No
participant in the 2001 Plan may be granted stock options for more than 600,000
shares of our common stock in the aggregate during the term of the 2001 Plan.
As of April 30, 2002, approximately 103 persons were eligible to participate in
the 2001 Plan.
Number of Shares Subject to the 2001 Plan
Subject to adjustment as described below, assuming adoption of the amendment
to the 2001 Plan, the maximum number of shares of our common stock for which
options may be granted under the 2001 Plan is 1,500,000 shares. Currently, the
maximum number of shares of our common stock for which options may be
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granted under the 2001 Plan is 850,000 shares. In the event of a stock split,
stock dividend or other relevant change affecting our common stock, the
committee has the authority to make appropriate adjustments to the number of
shares available for grants and to the number of shares under outstanding
grants and, if applicable, the exercise price under outstanding grants made
before the event in question.
Type of Awards Under the 2001 Plan
The committee may grant options under the 2001 Plan to purchase shares of
our common stock. Assuming adoption of the proposed amendment to the 2001 Plan,
the maximum number of shares of our common stock for which stock options may be
granted under the 2001 Plan is 1,500,000 shares, compared to the current
maximum of 850,000 shares. As of April 30, 2002, there were 136,500 shares
available for option grants under the 2001 Plan. The committee will determine
the number of shares subject to the option, the manner and time of the exercise
of the option, the exercise price per share of stock subject to the option and
other applicable conditions. The committee may grant either "nonqualified stock
options" (we refer to these as "NQSOs") or "incentive stock options" (we refer
to these as "ISOs") pursuant to Section 422 of the Internal Revenue Code, as
amended, or both. The exercise price of ISOs may not be less than the fair
market value of our common stock on the date of grant (and not less than 110%
of the fair market value in the case of options granted to an optionee owning
10% or more of our outstanding common stock). The exercise price for NQSOs may
not be less than 100% of the fair market value of our common stock on the date
of grant. The exercise price may, at the discretion of the committee, be paid
in cash, shares of our common stock or a combination thereof. We may make
financing available to the optionee on such terms as the committee shall
specify. The effect of an optionee's termination of employment by reason of
death, retirement, disability or otherwise and other conditions that will apply
to the exercise of the option will be specified in the option agreement
evidencing the grant of the option. ISOs granted to an optionee who owns 10% or
more of our outstanding common stock may not be exercisable more than five
years after the date of grant (or such other time period as the Internal
Revenue Code may require). NQSOs and all other ISOs may not be exercisable more
than ten years after the date of grant.
Amendment and Termination
Our Board of Directors may amend, abandon, suspend or terminate the 2001
Plan or any portion thereof at any time. No amendment shall, however, be made
without stockholder approval if such approval is necessary to comply with any
tax or regulatory requirement. No options may be granted under the 2001 Plan
after May 14, 2011.
Change in Control
In order to preserve the rights of participants in the event of a change in
control of ZixIt Corporation, the committee in its discretion may, at the time
a grant is made or any time thereafter, take one or more of the following
actions: (i) provide for the acceleration of any time period relating to the
exercise of an option, (ii) provide for the purchase of the option upon the
participant's request for an amount of cash or other property that could have
been received upon the exercise or realization of the option had the option
been currently exercisable or payable, (iii) adjust the terms of the option in
a manner determined by the committee to reflect the change in control, (iv)
cause an option to be assumed, or new rights substituted therefor, by another
entity or (v) make such other provisions as the committee may consider
equitable and in the best interest of ZixIt Corporation.
Federal Income Tax Consequences
Under current U.S. federal tax law, the following are the U.S. federal
income tax consequences generally arising with respect to stock option awards
under the 2001 Plan:
An employee receiving NQSOs will not realize any taxable income, and we will
not be entitled to any federal income tax deduction, at the time the NQSO is
granted. At the time the NQSO is exercised, however, the
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employee generally will realize ordinary income in an amount equal to the
excess of the fair market value of our common stock on the date of exercise
over the option price paid, and we will generally be entitled to a
corresponding federal income tax deduction. Upon the sale of our common stock
acquired upon exercise of a NQSO, the employee generally will recognize capital
gain or loss.
Any employee receiving ISOs generally will not realize taxable income, and
we will not be entitled to a federal income tax deduction, at the time an ISO
is granted or at the time the ISO is exercised. However, there may be certain
alternative minimum tax consequences to the employee resulting from the
exercise of an ISO. Upon a sale of our common stock acquired upon exercise of
an ISO, the employee generally will realize a capital gain or capital loss, and
we will receive no deduction, so long as the sale does not occur within two
years of the date of the grant of the ISO or within one year from the date the
shares were transferred to the employee upon the exercise of the ISO. If a sale
does occur within two years of the date of grant or one year of the transfer
date, however, part or all of the income recognized by the employee may be
treated as ordinary income. Under such circumstances, we could be entitled to a
federal income tax deduction equal to the ordinary income recognized by the
employee.
OUR BOARD OF DIRECTORS URGES YOU TO VOTE FOR THE ADOPTION OF THE PROPOSED
AMENDMENT TO ZIXIT CORPORATION'S 2001 STOCK OPTION PLAN.
PROPOSAL 4
AMENDMENT TO ZIXIT CORPORATION'S 1999 DIRECTORS' STOCK OPTION PLAN
We have adopted an amendment to our 1999 Directors' Stock Option Plan (we
refer to it as the "1999 Plan"), subject to approval by our stockholders. The
amendment increases the maximum number of shares of our common stock with
respect to which options may be granted under the 1999 Plan from 750,000 to
975,000. As of April 30, 2002, the aggregate market value of the shares covered
by the amendment was $1,116,000.
A copy of the 1999 Plan, as amended and restated after giving effect to the
amendment, is attached to this proxy statement as APPENDIX B. In 2001, each of
our eligible non-employee directors received 42,589 options under the 1999
Plan, for a total of 170,356 options as a group. As of April 30, 2002, each of
our eligible non-employee directors received an additional 35,116 options under
the 1999 Plan for 2002, totaling 175,580 options as a group. No option grants
have been made under the 1999 Plan out of the 225,000 additional shares
reserved under the 1999 Plan that stockholders are being asked to approve. See
"How are our Board members paid?" below. The following summary of certain
provisions of the 1999 Plan is qualified in its entirety by reference to the
full text of the 1999 Plan.
Summary
Our Board of Directors believes that the proposed amendment to the 1999 Plan
is in the best interest of ZixIt Corporation and its stockholders and is
necessary to enable us to attract and retain highly qualified non-employee
directors. The affirmative vote of a majority of the shares of our common stock
represented at the annual meeting and entitled to vote, if a quorum is present,
is required to approve the adoption of the proposed amendment to the 1999 Plan.
Administration
The 1999 Plan is administered by our Board of Directors and the Board's
Compensation and Stock Option Committee (either, the "committee"). The
committee is authorized to grant awards in the form of stock options and to
determine the terms and conditions relating to such options. The committee has
complete authority to construe, interpret and administer the provisions of the
1999 Plan and the provisions of the agreements governing
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options granted thereunder. The committee has the authority to prescribe, amend
and rescind rules and regulations pertaining to the 1999 Plan and to make all
other determinations necessary or deemed advisable in the administration of the
1999 Plan. The determinations and interpretations made by the committee are
final and conclusive.
Eligibility
Eligibility to participate in the 1999 Plan is limited to our non-employee
directors. As of April 30, 2002, approximately six persons were eligible to
participate in the 1999 Plan.
Automatic Grants of Options
The 1999 Plan provides that on the day that a non-employee director is first
appointed or elected to our Board of Directors, such director will be granted
nonqualified options to purchase 25,000 shares of our common stock. These
options vest six months from the grant date, and the exercise price is 100% of
the common stock price on the grant date.
Also, on the first business day of each subsequent January during the term
of the 1999 Plan, each non-employee director who has served on our Board at
least 12 consecutive months will automatically receive a further grant of
options. The number of options received by each non-employee director in a
given year will be determined according to the following formula: 1% of the
number of our outstanding common stock shares as of the December 31 immediately
preceding the grant date divided by the number of then-eligible directors.
However, in no event may the number of shares granted a director in any given
year exceed one-half of 1% of our outstanding common stock shares. The exercise
price for these options will be 120% of the common stock price on the grant
date.
Number of Shares Subject to the 1999 Plan
Subject to adjustment as described below, assuming adoption of the amendment
to the 1999 Plan, the maximum number of shares of our common stock for which
options may be granted under the 1999 Plan is 975,000 shares. Currently, the
maximum number of shares of our common stock for which options may be granted
under the 1999 Plan is 750,000 shares. As of April 30, 2002, there were 80,436
shares available for option grants under the 1999 Plan. In the event of a stock
split, stock dividend or other relevant change affecting our common stock, the
committee has the authority to make appropriate adjustments to the number of
shares available for grants and to the number of shares under outstanding
grants and, if applicable, the exercise price under outstanding grants made
before the event in question.
Amendment and Termination
Our Board of Directors may amend, abandon, suspend or terminate the 1999
Plan or any portion thereof at any time. No amendment shall, however, be made
without stockholder approval if such approval is necessary to comply with any
tax or regulatory requirement. No options may be granted under the 1999 Plan
after January 27, 2009.
Federal Income Tax Consequences
An optionee will not realize any taxable income, and we will not be entitled
to any federal income tax deduction, at the time the option is granted. At the
time the option is exercised, however, the optionee generally will realize
ordinary income in an amount equal to the excess of the fair market value of
the common stock on the date of exercise over the option price paid, and we
will generally be entitled to a corresponding federal income tax deduction.
OUR BOARD OF DIRECTORS URGES YOU TO VOTE FOR THE ADOPTION OF THE PROPOSED
AMENDMENT TO ZIXIT CORPORATION'S 1999 DIRECTORS' STOCK OPTION PLAN.
8
OTHER INFORMATION YOU NEED TO MAKE AN INFORMED DECISION
Who are our directors, executive officers and significant employees?
There is no family relationship among any of our directors, executive
officers or significant employees. The following table sets forth, as of April
30, 2002, the names of our directors, executive officers and other significant
employees and their respective ages and positions:
Name Age Position
---- --- --------
David P. Cook (1)(3).......... 50 Director, Founder
Donald D. Druckenbrodt........ 48 Vice President, Technology Planning
Dennis F. Heathcote........... 45 Vice President, North American Sales and Services
H. Wayne Huizenga............. 64 Director, Co-Vice Chairman
Michael E. Keane (2)(4)....... 46 Director
Dr. G. Gary Liu............... 47 Vice President and Chief Technical Officer
James S. Marston (2)(4)....... 68 Director
Wael Mohamed.................. 34 Vice President, Global Distribution
Daniel S. Nutkis.............. 36 Vice President, Strategy and Products
Jeffrey P. Papows (1)......... 48 Director, Co-Vice Chairman
David J. Robertson............ 43 Vice President, Engineering
John A. Ryan.................. 46 Director, Chairman, President and Chief Executive Officer
Antonio R. Sanchez, Jr. (1)(3) 59 Director
Dr. Ben G. Streetman (2)(3)(4) 62 Director
Ronald A. Woessner............ 45 Senior Vice President, General Counsel and Secretary
Steve M. York................. 51 Senior Vice President, Chief Financial Officer and Treasurer
--------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Nominating Committee.
(4) Member of the Compensation and Stock Option Committee.
DAVID P. COOK was elected to our Board in December 1995 and currently holds
the position of Founder of ZixIt Corporation. He served as President and Chief
Executive Officer from April 1998 until November 2001 and as Chairman from
April 1998 until October 2000. He previously served as Chairman and Chief
Executive Officer of ARBImetrics Corporation, a Dallas-based investment company
that he founded. Mr. Cook founded ZixIt Corporation (formerly known as Amtech
Corporation) and served as a director from 1984 until 1990, serving as Chairman
of the Executive Committee until 1990. Mr. Cook founded Blockbuster
Entertainment Corporation and was its Chief Executive Officer from its
inception until 1987. Prior to that, he was Chairman of Cook Data Services,
Inc., a software company that he also founded.
DONALD D. DRUCKENBRODT, Vice President, Technology Planning, rejoined our
company in January 1999. Mr. Druckenbrodt previously served as Vice President
of Amtech Systems Corporation, a former wholly-owned subsidiary of ZixIt
Corporation, from 1987 until 1990. Prior to rejoining ZixIt Corporation,
Mr. Druckenbrodt served as Vice President of OGRE Partners, Ltd., an oil and
gas economic modeling software firm, from 1992 until 1999. Mr. Druckenbrodt
also served as President of Blockbuster Computer Systems, Inc., a wholly-owned
subsidiary of Blockbuster Entertainment Corporation, from its inception until
1987.
9
DENNIS F. HEATHCOTE joined our company in December 2001 as Vice President,
North American Sales and Services. From May 1998 until June 2001, Mr. Heathcote
worked at Entrust, Inc., where he held a variety of senior sales and management
positions, including Vice President and General Manager of Entrust.net, Inc.,
Entrust, Inc.'s business unit focused on providing e-business trust solutions
for wired and wireless networks, from October 1999 until June 2001. In
addition, Mr. Heathcote, a Chartered Accountant, has more than 20 years of
experience in senior sales, finance and business administration roles in the
software and technology industry, including more than ten years with IBM and
IBM Global Services.
H. WAYNE HUIZENGA was elected director and Vice Chairman of our Board in May
2000 and has served as Co-Vice Chairman since November 2001. Mr. Huizenga has
been Chairman of AutoNation, Inc. since August 1995 and served as its Chief
Executive Officer from August 1995 until October 1996 and Co-Chief Executive
Officer from October 1996 until September 1999. Mr. Huizenga has also been
Chairman of Extended Stay America, Inc. since January 1995. Since May 1998, he
has been Chairman of Republic Services, Inc. and Chief Executive Officer from
May 1998 until December 1998. Since September 1996, he has been Chairman of
Boca Resorts, Inc. He owns the Miami Dolphins professional sports franchise, as
well as Pro Player Stadium, and is a director of NationsRent, Inc. and ANC
Rental Corporation. Mr. Huizenga was Chairman and Chief Executive Officer of
Blockbuster Entertainment Corporation from April 1987 until its merger with
Viacom, Inc. in September 1994. From September 1994 until October 1995, he
served as Vice Chairman of Viacom, Inc. and Chairman of Blockbuster
Entertainment Group, a division of Viacom, Inc. In January 1971, Mr. Huizenga
co-founded Waste Management, Inc. and served in various capacities, including
President, Chief Operating Officer and director, from its inception until 1984.
MICHAEL E. KEANE was elected to our Board in November 1997. Mr. Keane has
been Senior Vice President and Chief Financial Officer of UNOVA, Inc. since
November 1997. UNOVA, Inc. comprises the former industrial technology
businesses spun off from Western Atlas, Inc. in October 1997, where Mr. Keane
was also Senior Vice President and Chief Financial Officer from October 1996
until October 1997 and Vice President and Treasurer from March 1994 until
October 1996. Prior to that, he was Corporate Director, Pensions and Insurance,
for Litton Industries, Inc. from February 1991 until March 1994.
DR. G. GARY LIU became an employee of our company in January 1999 and was
subsequently appointed Vice President and Chief Technical Officer. From 1997
until beginning employment with ZixIt Corporation, Dr. Liu was President of
Securisys Corporation, an encryption, start-up enterprise that he founded. Dr.
Liu was also President of American Advanced Technology, Inc., a privately-held
telecommunications design consulting company, from its founding in January 1993
until its dissolution in January 1997. Dr. Liu has a doctorate degree in
physics from the California Institute of Technology (Caltech).
JAMES S. MARSTON was elected to our Board in September 1991. From September
1987 through February 1998, Mr. Marston served as a Senior, or Executive, Vice
President and the Chief Information Officer of APL Limited, a U.S.-based
intermodal shipping company. Between 1986 and 1987, Mr. Marston served as
President of AMR Technical Training Division, AMR Corporation. From 1982 until
1986, he was Vice President of Data Processing and Communications for American
Airlines, in which position he was in charge of the Sabre reservations system
and related technologies.
WAEL MOHAMED joined our company in February 2002 and serves as Vice
President, Global Distribution. Mr. Mohamed brings over 14 years of high-tech
sales and management experience, most recently serving as Senior Vice
President, Global Sales and Marketing of KLOCwork Solutions Inc. since July
2001. From October 1997 until July 2001, he worked for Entrust, Inc., where he
held several sales management positions, including Vice President of Sales,
Entrust Global Services and Vice President, Worldwide Sales of Entrust.net,
Inc. As a Vice President of Worldwide Sales, he was responsible for building an
extensive network of Entrust.net affiliate partners operating in 32 countries
around the world. Before joining Entrust, Mr. Mohamed held several key
executive and management positions at IBM Global Services from July 1996 until
October 1997. While at IBM Global Services, Mr. Mohamed managed a staff of over
100 employees and over $200,000,000 in service revenue.
10
DANIEL S. NUTKIS joined our company in February 2002 as Vice President,
Strategy and Products. Prior to that, he was a consultant to
PricewaterhouseCoopers LLP in 2001, serving as head of health care for the
firm's subsidiary, beTRUSTed. Before working for PricewaterhouseCoopers, in
January 2000 he founded (and served as Chief Executive Officer of) Medtegrity
Inc., a provider of health care industry-accepted identification,
authentication, security and privacy services. Prior to founding Medtegrity,
during 1999 Mr. Nutkis was Chairman of the Odin Group, a health care
information technology research firm. Prior to that, Mr. Nutkis worked at Ernst
& Young for over ten years where he held many positions, including National
Director of the firm's Health Care Emerging Technology practice, and Chief
Executive Officer of ConnectedHealth.Net, one of the firm's knowledge
management subsidiaries.
JEFFREY P. PAPOWS was elected to our Board in March 2000 and currently
serves as Co-Vice Chairman. He served as Chairman from October 2000 until
November 2001, and during that time, he had direct responsibility for the sales
and marketing management of our products and services. Mr. Papows is currently
President and Chief Executive Officer of Maptuit Corporation and served as
Chairman of IT Factory, Inc. until December 2001. Prior to joining Maptuit
Corporation, Mr. Papows held a seven-year tenure with Lotus Development
Corporation, an IBM company, where he served as its President and Chief
Executive Officer from 1998 until 2000, President and Chief Operating Officer
from 1996 until 1998 and Senior Vice President Notes Product Division from 1993
until 1996. In 1998, Mr. Papows published Enterprise.com, a book on the effects
and global promise of the Internet on large companies, which has since been
reprinted in nine editions and six languages. Mr. Papows has also been a
keynote speaker at Fall Comdex, Comdex Japan and Comdex Mexico.
DAVID J. ROBERTSON joined our company in March 2002 as Vice President,
Engineering. Mr. Robertson has over 20 years of experience in the
telecommunications and Internet industries, with specific expertise in network
architecture, security and protocols, PBX and Key System design in circuit and
packet environments and broadband and cellular access systems. He has also
worked extensively in product areas involving 802.11, DECT and other unlicensed
wireless access standards. Mr. Robertson has contributed to the early stages of
Telecommunications Standards' definition for the Unlicensed Wireless Industry
in the United States and Canada and to the finalization of the ADSI standard
for enhanced telecommunications carrier service deployment. He participated in
pioneering efforts toward end-to-end voice quality standards for Quality of
Service in many wireline and wireless domains. He is a member of multiple
company advisory boards and serves with the City of Richardson Chamber of
Commerce.
JOHN A. RYAN joined our company as President and Chief Executive Officer and
was elected director and Chairman of our Board in November 2001. From January
1997 through January 2001, he served as President, Chief Executive Officer and
director of Entrust, Inc., a company for which he led the private placement in
1996 and took public in August 1998. Prior to that, Mr. Ryan held a number of
senior management positions in general management, marketing and sales, and
finance with Nortel Networks, with his most recent position being Vice
President and General Manager of Nortel's global multimedia and Internet
projects unit. Before joining Nortel, Mr. Ryan worked for Deloitte Touche LLP
and was awarded his Canadian Chartered Accountant designation in 1981. He has
also served as an advisory board member to Scopus Technologies. Prior to
joining ZixIt Corporation, Mr. Ryan formed ARM Technologies, a privately-held
Internet consulting and services company that he founded in February 2001. He
also currently serves as a director of Tilion Inc., a privately-held
Massachusetts-based company that focuses on "in-the-Net" analytics services
based on XML for supply chain transactions, and RIPTECH Inc., a privately-held,
managed security services company based in Washington, D.C. He is an advisory
board member to Mobelium, a privately-held Internet wireless services company
based in California, and is on the Board of Trustees for the Hart eCenter at
Southern Methodist University.
ANTONIO R. SANCHEZ, JR. was one of our early investors and was elected to
our Board in February 1993. Mr. Sanchez is Chairman and Chief Executive Officer
of Sanchez Oil & Gas Corporation. He also holds interests in banking, real
estate development, venture capital and various other investments. Mr. Sanchez
serves as a director of International Bank of Commerce ("IBC") and as a
director and stockholder of IBC's publicly- traded holding company,
International Bancshares Corporation. Mr. Sanchez is also a member of the
University of Texas System Board of Regents and is a director of Conoco, Inc.
11
DR. BEN G. STREETMAN became a director in July 1998. Dr. Streetman is Dean
of the College of Engineering at The University of Texas at Austin and holds
the Dula D. Cockrell Centennial Chair in Engineering. He is a Professor of
Electrical and Computer Engineering and was the founding director of the
Microelectronics Research Center, The University of Texas at Austin, from 1984
until 1996. Dr. Streetman also serves as a director of National Instruments
Corporation and Global Marine, Inc.
RONALD A. WOESSNER joined our company in April 1992 as General Counsel and
was subsequently appointed Secretary and Senior Vice President. He was
previously a corporate and securities attorney with the Dallas-based law firm
of Johnson & Gibbs, P.C.
STEVE M. YORK joined our company in April 1990 as Vice President, Chief
Financial Officer and Treasurer and was subsequently appointed Senior Vice
President. Mr. York, a Certified Public Accountant, previously held various
financial management positions with commercial operating companies and was
employed by Arthur Young & Co. (now Ernst & Young).
Following the meeting, our Board of Directors will adopt a resolution fixing
the number of seats on our Board at six. This resolution will supercede all
prior resolutions regarding the number of seats on our Board.
How much stock do our principal stockholders, directors and executive officers
own?
Set forth below is information as of April 30, 2002 concerning:
. each stockholder known by us to beneficially own more than 5% of our
outstanding shares of common stock;
. the shareholdings of each of our directors and named executive officers;
and
. the shareholdings of all directors and executive officers as a group.
Security Ownership of Certain Beneficial Owners and Management Table
Amount and Nature
of Beneficial Ownership (1)(2)
-----------------------------------------
Number of Shares Percentage of Total
Beneficial Owner Beneficially Owned Shares Outstanding (3)
---------------- ------------------ ----------------------
David P. Cook (4)........................................... 1,347,577 7.12%
Donald D. Druckenbrodt (5).................................. 159,675 *
George W. Haywood (6)....................................... 3,500,697 19.81%
c/o Cronin & Vris, LLP
380 Madison Avenue, 24th Floor
New York, New York 10017
Dennis F. Heathcote (7)..................................... 31,250 *
H. Wayne Huizenga (8)....................................... 178,481 1.00%
Michael E. Keane (7)........................................ 112,455 *
James S. Marston (7)........................................ 122,455 *
Jeffrey P. Papows (7)....................................... 250,000 1.39%
John A. Ryan (9)............................................ 202,672 1.14%
Antonio R. Sanchez, Jr. (10)................................ 2,154,954 12.11%
Dr. Ben G. Streetman (7).................................... 62,147 *
Ronald A. Woessner (11)..................................... 164,024 *
Steve M. York (12).......................................... 196,191 1.10%
All directors and executive officers as a group (12 persons) 4,981,881 24.60%
--------
* Denotes ownership of less than 1%.
(1) Reported in accordance with the beneficial ownership rules of the SEC.
Unless otherwise noted, each stockholder listed in the table has both sole
voting and sole investment power over the common stock shown as
beneficially owned, subject to community property laws where applicable.
12
(2) Unless otherwise noted, the address for each beneficial owner is c/o ZixIt
Corporation, 2711 North Haskell Avenue, Suite 2300, LB 36, Dallas, Texas
75204-2960.
(3) Percentages are based on the total number of shares of our common stock
outstanding at April 30, 2002. Shares of our common stock that were not
outstanding but could be acquired upon exercise of an option or other
convertible security within 60 days of April 30, 2002 are deemed
outstanding for the purpose of computing the percentage of outstanding
shares beneficially owned by a particular person. However, such shares are
not deemed to be outstanding for the purpose of computing the percentage
of outstanding shares beneficially owned by any other person.
(4) Includes 1,253,577 shares that Mr. Cook has the right to acquire under
outstanding stock options that are currently exercisable or that become
exercisable within 60 days of April 30, 2002.
(5) Includes 159,500 shares that Mr. Druckenbrodt has the right to acquire
under outstanding stock options that are currently exercisable or that
become exercisable within 60 days of April 30, 2002.
(6) Includes 106,500 shares that are owned by family members of Mr. Haywood.
(7) This individual has the right to acquire these shares under outstanding
stock options that are currently exercisable or that become exercisable
within 60 days of April 30, 2002.
(8) Includes 143,062 shares that Mr. Huizenga has the right to acquire under
outstanding stock options and warrants that are currently exercisable or
that become exercisable within 60 days of April 30, 2002. Mr. Huizenga
disclaims beneficial ownership with respect to 54,166 shares.
(9) Includes 50,000 shares that Mr. Ryan has the right to acquire under
outstanding stock options that are currently exercisable or that become
exercisable within 60 days of April 30, 2002 and 152,672 shares that are
subject to forfeiture under certain circumstances.
(10) Of the 2,154,954 shares reported, (i) 1,633,025 shares are owned by Mr.
Sanchez directly, (ii) 9,375 shares are held by family members of Mr.
Sanchez, (iii) 91,123 shares, over which Mr. Sanchez exercises voting,
investment and disposition power, are held in trusts for which Mr. Sanchez
serves as trustee or co-trustee for the benefit of other persons, (iv)
262,100 shares, over which Mr. Sanchez exercises voting, investment and
disposition power, are held by a family limited partnership for which Mr.
Sanchez serves as managing general partner and (v) 39,376 shares are held
by a family trust of which Mr. Sanchez is a beneficiary. Also, includes
119,955 shares that Mr. Sanchez has the right to acquire under outstanding
stock options that are currently exercisable or that become exercisable
within 60 days of April 30, 2002.
(11) Includes 127,500 shares that Mr. Woessner has the right to acquire under
outstanding stock options that are currently exercisable or that become
exercisable within 60 days of April 30, 2002. Mr. Woessner disclaims
beneficial ownership with respect to 27,611 shares.
(12) Includes 141,500 shares that Mr. York has the right to acquire under
outstanding stock options that are currently exercisable or that become
exercisable within 60 days of April 30, 2002.
Section 16(a) Beneficial Ownership Reporting Compliance
Under the securities laws of the United States, our directors, officers and
any beneficial owner of more than 10% of our outstanding common stock
(collectively, "insiders") are required to report their initial ownership of
our common stock and any subsequent changes in their ownership to the SEC. The
SEC's rules require insiders to provide us with copies of all Section 16(a)
reports that the insiders file with the SEC. Specific due dates have been
established by the SEC, and we are required to disclose any failure to file by
those dates. Based solely upon our review of copies of Section 16(a) reports
that we received from insiders for their 2001 transactions and written
representations that no such additional reports were required to be filed with
the SEC, we believe that our insiders have complied with all Section 16(a)
filing requirements applicable to them during 2001.
How do our Board and its committees work?
Board Committees and Meetings
Our business is managed under the direction of our Board of Directors. Our
Board meets during the year to review significant developments and to act on
matters requiring Board approval. Our Board met on three occasions during the
year ended December 31, 2001. Each of the current directors, except H. Wayne
Huizenga
13
and Antonio R. Sanchez, Jr., attended at least 75% of all meetings of our Board
called during the time he served as a director. Each of Messrs. Huizenga and
Sanchez attended two of the three meetings that occurred during his tenure.
Each of the current directors attended at least 75% of all meetings of each
committee of our Board on which he served.
Our Board has established an Audit Committee, Compensation and Stock Option
Committee, Executive Committee and Nominating Committee to devote attention to
specific subjects and to assist our Board in discharging its responsibilities.
The functions of these committees are described below.
Audit Committee
Our Audit Committee is currently comprised of Michael E. Keane, James S.
Marston and Dr. Ben G. Streetman, all of whom are non-employee directors. The
Audit Committee operates under a written charter adopted by our Board of
Directors and overseas our financial reporting process on behalf of our Board,
pursuant to the charter. This includes reviewing the scope and results of
audits made by the independent auditors. The Audit Committee met on six
occasions during the year ended December 31, 2001.
Our Board has, in accordance with the recommendation of the Audit Committee,
chosen the firm of Ernst & Young as our independent auditors for 2002.
Following is a summary of Ernst & Young's fees for the year ended December 31,
2001:
Audit Fees. Ernst & Young's fees for our 2001 annual audit were $86,500.
Financial Information Systems Design and Implementation Fees. Ernst & Young
did not render any professional services to us in 2001 with respect to
financial information systems design and implementation.
All Other Fees. Ernst & Young's fees for all other professional services
rendered to us during 2001 were $65,806, including audit-related services of
$42,700 and non-audit services of $23,106. Audit-related services included fees
for the employee benefit plan, SEC registration statements and accounting
consultations. Non-audit services included fees for tax consultations.
The Audit Committee has determined that the services provided under "All
Other Fees" are compatible with maintaining Ernst & Young's independence.
Compensation and Stock Option Committee
Our Compensation and Stock Option Committee is currently comprised of
Michael E. Keane, James S. Marston and Dr. Ben G. Streetman. The Compensation
and Stock Option Committee or the entire Board of Directors administers our
stock option plans and executive compensation. The Compensation and Stock
Option Committee met on four occasions during the year ended December 31, 2001.
Executive Committee
Our Executive Committee is currently comprised of David P. Cook, Jeffrey P.
Papows and Antonio R. Sanchez, Jr. The Executive Committee has authority to
exercise the full powers of our Board of Directors, subject to certain
exceptions. The Executive Committee did not meet during the year ended December
31, 2001.
Nominating Committee
Our Nominating Committee is currently comprised of David P. Cook, Antonio R.
Sanchez, Jr. and Dr. Ben G. Streetman. The Nominating Committee did not meet
during the year ended December 31, 2001.
Stockholders desiring to submit nominations for Board members should forward
them no later than February 10, 2003 to Ronald A. Woessner, Secretary, at our
principal executive offices at 2711 North Haskell Avenue, Suite 2300, LB 36,
Dallas, Texas 75204-2960.
14
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth the compensation paid to our named executive
officers for services rendered to ZixIt Corporation for the periods indicated:
Long-Term Compensation
-----------------------------
Annual Compensation Awards Payouts
--------------------------------- --------------------- -------
Base Number of
Salary Bonus Other Restricted Securities
(Cash and (Cash and Annual Stock Underlying LTIP All Other
Name and Principal Position Year Non-cash) Non-cash) Compensation Award Options Payouts Compensation(1)
--------------------------- ---- --------- ---------- ------------ ---------- ---------- ------- ---------------
David P. Cook (2)................ 2001 $500,000 $ -- $ -- $ -- -- -- $ --
Founder......................... 2000 -- -- -- -- 500,000 -- --
1999 -- -- -- -- -- -- --
Donald D. Druckenbrodt........... 2001 180,000 -- -- -- -- -- --
Vice President, 2000 144,000 -- -- -- 109,500 -- --
Technology Planning............. 1999 142,546 -- -- -- 50,000 -- 2,403
Steven M. Gersten (3)............ 2001 274,560 -- -- -- 200,000 -- --
Senior Vice President, Sales & 2000 -- -- -- -- -- -- --
Marketing....................... 1999 -- -- -- -- -- -- --
Jeffrey P. Papows (4)............ 2001 150,000 -- -- -- -- -- --
Co-Vice Chairman................ 2000 31,250 -- -- -- 275,000 -- --
1999 -- -- -- -- -- -- --
J. Michael Poss (5).............. 2001 204,000 -- -- -- 40,000 -- --
Vice President, Sales Operations 2000 127,500 -- -- -- 144,000 -- --
1999 -- -- -- -- -- -- --
John A. Ryan (6)................. 2001 37,500 1,000,000 -- -- 1,050,000 -- --
Chairman, President and Chief 2000 -- -- -- -- -- -- --
Executive Officer............... 1999 -- -- -- -- -- -- --
Ronald A. Woessner............... 2001 216,000 -- -- -- -- -- 8,123
Senior Vice President, General 2000 150,000 -- -- -- 52,500 -- 4,960
Counsel and Secretary........... 1999 150,000 -- -- -- -- -- 11,688
Steve M. York.................... 2001 216,000 -- -- -- 50,000 -- 2,975
Senior Vice President, Chief 2000 193,000 -- -- -- -- -- 2,975
Financial Officer and Treasurer. 1999 193,000 -- -- 112,970 -- -- 5,093
--------
(1) Represents our contributions to our 401(k) Retirement Plan or Employee
Stock Purchase Plan.
(2) Served as our President and Chief Executive Officer from April 1998 until
November 2001, at which time he was appointed "Founder."
(3) Separated from employment with ZixIt Corporation in November 2001.
(4) Served as our salaried Chairman from October 2000 until November 2001.
(5) Separated from employment with ZixIt Corporation in February 2002.
(6) Appointed Chairman, President and Chief Executive Officer in November 2001.
The bonus to Mr. Ryan consisted of 152,672 shares of our common stock
valued at $1,000,000. In the event Mr. Ryan is terminated for "cause" or he
resigns other than for "good reason," as such terms are defined in his
employment agreement, prior to the first or second year anniversaries of
employment, he must return to us shares of our common stock equal to 100%
and 50% of the 152,672 signing bonus shares, respectively, or cash in the
amount of $1,000,000 and $500,000, respectively. Notwithstanding the
foregoing, upon the occurrence of an "accelerated vesting event" (as
defined in his stock option agreement), any obligation of Mr. Ryan to
return such shares to us shall no longer be in force.
15
Option Grants in 2001 to Named Executive Officers
We made the following stock option grants to our named executive officers
during the year ended December 31, 2001:
Individual Grants Potential Realizable
------------------------------------------- Value at Assumed
Number of % of Total Annual Rates of Stock
Securities Options Exercise Price Appreciation
Underlying Granted to Price for Option Term
Options Employees Per Expiration ------------------------------
Name Granted in 2001 Share Date 0% 5% 10%
---- ---------- ---------- -------- ---------- -------- ---------- ----------
David P. Cook......... -- -- $ -- -- $ -- $ -- $ --
Donald D. Druckenbrodt -- -- -- -- -- -- --
Steven M. Gersten..... 200,000(1) 8.67 7.94 01/08/2011 -- 998,000 2,530,000
Jeffrey P. Papows..... -- -- -- -- -- -- --
J. Michael Poss (2)... 40,000(2) 1.73 7.00 08/16/2006 107,600 214,800 344,400
John A. Ryan.......... 50,000(3) 2.17 7.19 03/19/2006 -- 99,500 219,500
1,000,000(4) 43.35 5.24 11/13/2011 -- 3,000,000 7,880,000
Ronald A. Woessner.... -- -- -- -- -- -- --
Steve M. York......... 50,000(5) 2.17 5.25 12/11/2011 -- 165,000 418,500
--------
(1) The options were cancelled upon Mr. Gersten's separation from employment
with ZixIt Corporation in November 2001.
(2) Mr. Poss separated from employment with ZixIt Corporation in February 2002.
The options became fully vested in November 2001 due to the occurrence of
certain events.
(3) The options vest and become exercisable six months from the date of grant.
(4) The options become 50% vested on the first year anniversary of employment
and the balance vests pro-rata every three months during the second year of
employment. In the event of a "change in control" (as defined) of ZixIt
Corporation or the occurrence of other specified events, the options become
immediately exercisable.
(5) The options vest and become exercisable over three years. In the event of
termination under certain circumstances or a "change in control" (as
defined) of ZixIt Corporation or a material subsidiary of ZixIt Corporation
under specified circumstances, the options become immediately exercisable.
Aggregated Option Exercises in 2001 and Year-end Option Values
The following table sets forth information relating to the exercises of
stock options during the year ended December 31, 2001, and the value of
unexercised stock options held as of December 31, 2001 by each of our named
executive officers:
Option Exercises Number of Securities
During 2001 Underlying Unexercised Value of Unexercised
-------------------- Options at In-the-Money Options at
Number of December 31, 2001 December 31, 2001
Shares ------------------------- -------------------------
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
David P. Cook......... -- -- 2,170,244 333,333 $ -- $ --
Donald D. Druckenbrodt -- -- 83,333 76,167 -- --
Steven M. Gersten (1). -- -- -- -- -- --
Jeffrey P. Papows..... -- -- 225,000 50,000 -- --
J. Michael Poss (2)... -- -- 101,667 82,333 -- --
John A. Ryan.......... -- -- 50,000 1,000,000 -- --
Ronald A. Woessner.... -- -- 127,500 25,000 79,060 --
Steve M. York......... -- -- 56,500 50,000 -- --
--------
(1) Separated from employment with ZixIt Corporation in November 2001.
(2) Separated from employment with ZixIt Corporation in February 2002.
16
Non-Stockholder Approved Equity Compensation Arrangements
The following table provides information about our equity compensation
arrangements that have been approved by our stockholders, as well as equity
compensation arrangements that have not been approved by our stockholders, as
of December 31, 2001:
Equity Compensation Plan Information
----------------------------------------
Number of Securities
Number of Securities Remaining Available for
to be Issued Weighted-Average Future Issuance Under
Upon Exercise of Exercise Price of Equity Compensation Plans
Outstanding Options, Outstanding Options, (Excluding Securities
Plan Category Warrants and Rights Warrants and Rights Reflected in Column (a))
------------- -------------------- -------------------- -------------------------
(a) (b) (c)
Equity compensation plans approved by
stockholders (1)....................... 2,583,542 $14.63 1,020,928
Equity compensation plans not approved by
stockholders........................... 4,074,077 $ 6.81 55,000
Total............................. 6,657,619 $ 9.85 1,075,928
ZixIt Corporation 2001 Stock
Option Plan............................ 106,000 $ 5.06 744,000
--------
(1) Includes the ZixIt Corporation 2001 Stock Option Plan.
A description of the material terms of our equity arrangements that have not
been approved by our stockholders follows:
John A. Ryan
Mr. Ryan, our Chairman, President and Chief Executive Officer, received a
signing bonus of 152,672 shares of our common stock (valued at $1,000,000) in
connection with his employment, which began November 16, 2001. If Mr. Ryan's
employment with us is terminated for "cause" or he resigns other than for "good
reason," as such terms are defined in his employment agreement, prior to the
first or second year anniversaries of employment, he must return to us shares
of our common stock equal to 100% and 50% of the 152,672 signing bonus shares,
respectively, or cash in the amount of $1,000,000 and $500,000, respectively.
Notwithstanding the foregoing, upon the occurrence of an "accelerated vesting
event" (as defined in his stock option agreement), any obligation of Mr. Ryan
to return such shares to us shall no longer be in force. In addition, Mr. Ryan
received options to acquire 1,000,000 shares of our common stock at an exercise
price of $5.24 per share. The options become 50% vested on the first year
anniversary of employment and the balance vests pro-rata every three months
during the second year of employment. The options will automatically vest 100%
in the event of a "change in control" (as defined) of ZixIt Corporation or the
occurrence of other specified events.
David P. Cook
Mr. Cook, our Founder and formerly our President and Chief Executive
Officer, received an option in 1998 to acquire 4,254,627 shares of our common
stock at an exercise price of $7.00 per share. The options have a five-year
term and vested quarterly over two years--all of the options are currently
vested. Of this original option grant, Mr. Cook still holds options to acquire
1,056,910 shares as of April 30, 2002, after giving effect to Mr. Cook's option
exercises and his reallocation of 2,138,890 of his option shares to the members
of the investment group that, in 2000, invested $44,000,000 in our company, and
807,127 of his option shares (we refer to them as the "Cook Employee
Transferred Options") to our employees and a director.
17
Cook Employee Transferred Options
The 807,127 Cook Employee Transferred Options are governed by plan
arrangements that are substantially the same as (if not identical to) the
provisions of the 2001 Plan, which is described above under "PROPOSAL 3" and
set forth in its entirety as APPENDIX A. The exercise prices of the Cook
Employee Transferred Options range from $7.00 to $13.75, and the options
generally vest pro-rata and annually over three years.
Other Option Grants
As of April 30, 2002, Messrs. Heathcote, Nutkis, Mohamed, Robertson and
certain other of our current employees hold an aggregate of 560,000 options
that were issued under plans or arrangements not approved by our stockholders.
These options are governed by plan arrangements that are substantially the same
as (if not identical) to the provisions of the 2001 Plan, which is described
above under "PROPOSAL 3" and set forth in its entirety as APPENDIX A. The
exercise price of all of these options is the fair market value of our common
stock on the date of grant, and the vesting periods range from immediately
vested (in the case of 25% of the options granted to three of our
recently-hired senior executives) to vesting annually and pro-rata over three
years).
Employment and Severance Agreements with Certain Executive Officers
We entered into a two-year employment agreement with Mr. Ryan, effective
November 16, 2001, which provides for a $300,000 annual salary, plus $200,000
cash bonus payable at the end of the first year of employment, and a cash bonus
opportunity of at least $200,000 payable at the end of the second year of
employment that is tied to the achievement of defined objectives. As previously
stated, Mr. Ryan also received a signing bonus of 152,672 shares of our common
stock (valued at $1,000,000). If Mr. Ryan's employment with us is terminated
for "cause" or he resigns other than for "good reason," as such terms are
defined in his employment agreement, prior to the first or second year
anniversaries of employment, he must return to us shares of our common stock
equal to 100% and 50% of the 152,672 signing bonus shares, respectively, or
cash in the amount of $1,000,000 and $500,000, respectively. Notwithstanding
the foregoing, upon the occurrence of an "accelerated vesting event" (as
defined in his stock option agreement), any obligation of Mr. Ryan to return
such shares to us shall no longer be in force.
We entered into a three-year employment agreement with Mr. Cook, effective
as of December 26, 2000, which provided for a $500,000 annual salary. Effective
February 1, 2002, Mr. Cook waived the $500,000 annual salary under his
employment arrangement, and his current salary is a nominal $1.00 per year.
We are a party to severance agreements with Messrs. Druckenbrodt, Woessner
and York which provide for the payment to each of them of 12 months, 18 months
and 18 months, respectively, of each of their base salaries in the event each
has "good reason" (as defined) to resign his employment or if his employment is
terminated other than for "cause" (as defined). The severance agreements also
provide for the payment to Messrs. Druckenbrodt, Woessner and York of one and a
half times, two times and three times, respectively, each of their annual base
salaries in the event his employment terminates after a "change in control" (as
defined) of ZixIt Corporation. The severance agreements also contain
confidentiality and stock option acceleration provisions.
How are our Board members paid?
On the day an outside director is first appointed or elected to our Board of
Directors, such director is granted nonqualified options to purchase 25,000
shares of our common stock, which vest six months from the grant date with an
exercise price equal to 100% of our common stock price on the grant date. Also,
in January of each year, each director that has served on our Board at least 12
consecutive months will receive a further grant of options determined according
to a specified formula, which provides that the eligible directors collectively
receive options for 1% of our outstanding common stock. The exercise price for
these options will be 120% of our common stock price on the grant date. These
annual options vest over three years. We pay a $15,000 retainer fee
18
to outside directors until they are eligible to receive the annual option
grants. We reimburse our directors for expenses they incur attending our Board
or committee meetings.
Certain Relationships and Related Transactions
In January 2001, we entered into a two-year agreement with IT Factory, Inc.
(we refer to it as "IT Factory") whereby IT Factory agreed to market our
products and services to their customers in return for our agreement to pay a
specified portion of revenues earned by us, which are associated with IT
Factory's customers. In February 2001, we paid IT Factory $300,000 and
committed to pay an additional $250,000 in February 2002 to support IT
Factory's marketing efforts. Additionally, we granted IT Factory a
performance-based stock option whereby IT Factory had the right to purchase up
to 109,529 shares of our common stock. We subsequently cancelled the agreement,
including the options and the payment commitment. Separately, we paid IT
Factory $420,000 in 2001 for certain software development projects. Mr. Papows,
a director of ZixIt Corporation since March 2000 and our Chairman from October
2000 until November 2001, served as Chairman of IT Factory until December 2001.
In December 2000, we purchased approximately 9% of the equity ownership of
Maptuit Corporation (we refer to it as "Maptuit") for $3,000,000 in cash and
committed to a follow-on investment of $2,000,000. Accordingly, in July 2001,
we made an additional $2,000,000 cash investment in Maptuit and received a
promissory note convertible into Maptuit equity securities. The note bears
interest at prime plus 1%, is due in July 2006 and automatically converts into
Maptuit equity securities at the same price per share obtained if a third-party
equity financing arrangement is completed, as defined. There is no readily
determinable market value for our investments in Maptuit since Maptuit is
privately held. Investments of this nature are subject to significant
fluctuations in fair market value due to the volatility of the equity markets
and the significant business and investment risks inherent in early-stage
enterprises. We record impairment losses when, in our judgment, events and
circumstances indicate our investment has been impaired. Maptuit has been
seeking third-party debt or equity financing to sustain its operations. To
date, Maptuit has not secured additional financing, and it is uncertain whether
Maptuit will be able to raise the necessary funds required to execute its
business plan such that we will recover our investment. Therefore, in the third
and fourth quarters of 2001, we wrote off the $5,000,000 investment. Maptuit,
an early-stage company, is an Internet application service provider that
supplies wireline and wireless Internet location-based services. Mr. Papows
serves as the President and Chief Executive Officer of Maptuit and holds a
minority equity interest in Maptuit.
Mr. York, our Senior Vice President, Chief Financial Officer and Treasurer,
was indebted to us at December 31, 2001 in the principal amount of $90,000.
This amount represents money loaned by us to fund the exercise of retention
incentive options related to certain of our shares held by Mr. York. Mr. York's
indebtedness is represented by a promissory note that bears interest at the
rate of 4.66% per annum. The note is secured by the shares issued upon exercise
of the retention incentive options and is due September 2002 (unless becoming
due earlier under certain circumstances described in the note).
In the fourth quarter of 2000, we entered into certain technology and
marketing agreements with Entrust, Inc. (we refer to it as "Entrust"). Mr.
Ryan, our Chairman, President and Chief Executive Officer, was Chief Executive
Officer of Entrust when such agreements were executed and currently holds a
minority equity interest in Entrust.
Compensation Committee Interlocks and Insider Participation
The Compensation and Stock Option Committee is comprised of three directors.
Michael E. Keane, James S. Marston, Jeffrey P. Papows and Dr. Ben G. Streetman
served on our Compensation and Stock Option Committee at various times during
the year ended December 31, 2001. None of Messrs. Keane, Marston or
Dr. Streetman is or was a current officer or employee of ZixIt Corporation. Mr.
Papows served as the salaried Chairman of our Board from October 2000 until
November 2001. Also, as noted above under "Certain Relationships and Related
Transactions," Mr. Papows is President and Chief Executive Officer of Maptuit
and
19
served as Chairman of IT Factory. The committee met on four occasions during
the year ended December 31, 2001. Other than Mr. Woessner, who serves as our
representative on the Board of Directors of Maptuit, we have no executive
officers who serve as a member of a board of directors or compensation
committee of any other entity that has one or more executive officers serving
as a member of our Board or Compensation and Stock Option Committee.
REPORT OF BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
Our Compensation and Stock Option Committee or our entire Board of Directors
approves salaries and annual bonuses for executive officers and administers our
stock option plans.
Compensation Philosophy
Our compensation philosophy is to offer our executive officers compensation
packages that are competitive with those being paid for comparable positions.
Compensation consists mainly of salary and stock options. In setting the
compensation for our executive officers in recent years, we have emphasized
stock options rather than cash compensation. Bonuses have not been a factor in
executive officer compensation in recent years -- no bonuses have been paid to
any of our executive officers since 1998. However, the compensation packages of
our recently hired Chairman, President and Chief Executive Officer and our
recently-hired senior sales and marketing executives have substantial bonus
opportunities.
Chief Executive Officer Compensation
At December 31, 2001, our Chairman, President and Chief Executive Officer
was John A. Ryan, who was hired in November 2001. Mr. Ryan has a two-year
employment agreement which provides for an annual base salary of $300,000, a
cash bonus of $200,000 payable at the end of the first year of employment, and
a cash bonus opportunity of at least $200,000 payable at the end of the second
year of employment that is tied to the achievement of defined objectives. Mr.
Ryan also received a signing bonus of 152,672 shares of our common stock
(valued at $1,000,000). If Mr. Ryan's employment with us is terminated for
"cause" or he resigns other than for "good reason," as such terms are defined
in his employment agreement, prior to the first or second year anniversaries of
employment, he must return to us shares of our common stock equal to 100% and
50% of the 152,672 signing bonus shares, respectively, or cash in the amount of
$1,000,000 and $500,000, respectively. Notwithstanding the foregoing, upon the
occurrence of an "accelerated vesting event" (as defined in his stock option
agreement), any obligation of Mr. Ryan to return such shares to us shall no
longer be in force. In addition, Mr. Ryan received options to acquire 1,000,000
shares of our common stock at an exercise price of $5.24 per share. The options
become 50% vested on the first year anniversary of employment and the balance
vests pro-rata every three months during the second year of employment. The
options will automatically vest 100% in the event of a "change in control" (as
defined) of ZixIt Corporation or the occurrence of other specified events.
Prior to November 2001, our President and Chief Executive Officer was David
P. Cook. Mr. Cook currently holds the title of "Founder." Mr. Cook had been
serving as our President and Chief Executive Officer since February 1998 for no
cash salary or bonus during 1998, 1999 and 2000. His compensation consisted
entirely of options to acquire 4,254,627 shares of our common stock at an
exercise price of $7.00 per share (twice the closing price of our common stock
on the day preceding the first day of his employment arrangement). In 2000, Mr.
Cook exercised and sold 251,700 of these option shares and realized
$11,286,377. Additionally, during 2000 and 2001, Mr. Cook reallocated 1,222,223
of his option shares to the members of the investment group that, in May 2000,
invested $44,000,000 in ZixIt Corporation, and 807,127 of his option shares to
ZixIt employees and a director. In March 2002, Mr. Cook reallocated an
additional 916,667 of his option shares to the same members of the investment
group. These reallocations allowed ZixIt to sell shares of our common stock to
the investor group at market value and to attract and retain key personnel
without stockholder dilution. We thank Mr. Cook for reallocating a large
percentage of his personal option shares for the benefit of the company.
20
At the end of 2000, we entered into a new three-year employment arrangement
with Mr. Cook, which was effective as of December 26, 2000, and granted Mr.
Cook options to acquire 500,000 shares of our common stock at an exercise price
of $6.06 per share. The options vest annually and pro-rata over three years.
During 2001, Mr. Cook received an annual salary of $500,000 under this
employment arrangement. Effective February 1, 2002, Mr. Cook waived the
$500,000 salary under his employment arrangement, and his current salary is a
nominal $1.00 per year.
Inasmuch as a substantial portion of Mr. Ryan's and Mr. Cook's compensation
is stock based, their interests are aligned precisely with those of our
stockholders. Our Board believes that Mr. Ryan's employment arrangement is
appropriate in light of his demonstrated prior success at Entrust, Inc. in
building a customer base and achieving revenues and that Mr. Cook's employment
arrangement is appropriate in light of his demonstrated prior success in
founding and guiding new businesses.
Other Executive Officer Compensation
At December 31, 2001, our other executive officers were Donald D.
Druckenbrodt, Vice President, Technology Planning; Dennis F. Heathcote, Vice
President, North American Sales and Services; J. Michael Poss, Vice President,
Sales Operations; Steve M. York, Senior Vice President, Chief Financial Officer
and Treasurer; and Ronald A. Woessner, Senior Vice President, General Counsel
and Secretary. In January 2001, the Board increased the compensation for
Messrs. Druckenbrodt, Poss, Woessner and York because it believed that the cash
compensation being paid to them was below the level being paid by other
companies for executives with comparable experience and skill sets.
Internal Revenue Code (S)162(m) Compliance
Compensation in excess of $1,000,000 per year realized by any of our five
most highly compensated executive officers is not deductible by us for federal
income tax purposes unless the compensation arrangement complies with the
requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended.
Neither the options granted to Mr. Cook in 1998 nor the options granted to
Mr. Ryan in 2001 comply with the requirements of Section 162(m), which, among
other things, would have required us to obtain stockholder approval of the
option grants. Time was of the essence when we were discussing Mr. Cook's and
Mr. Ryan's potential employment. Seeking stockholder approval of the option
grants would have, in the Board's opinion, imposed an unwarranted and harmful
delay in completing the employment arrangements and Messrs. Cook and Ryan
commencing their employment duties. These options will, during the year of
exercise, likely result in Mr. Cook or Mr. Ryan realizing compensation in
excess of $1,000,000, depending on the number of options exercised and the
price of our common stock at the time.
Submitted by the Board of Directors:
David P. Cook
H. Wayne Huizenga
Michael E. Keane
James S. Marston
Jeffrey P. Papows
John A. Ryan
Antonio R. Sanchez, Jr.
Dr. Ben G. Streetman
This Report will not be deemed to be incorporated by reference in any filing
by us under the Securities Act of 1933 or the Securities Exchange Act of 1934,
except to the extent that we specifically incorporate this Report by reference.
21
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total return of an investment in
our common stock over the five-year period ended December 31, 2001, as compared
with the cumulative total return of an investment in (i) the Center for
Research in Securities Prices ("CRSP") Total Return Index for The NASDAQ Stock
Market (U.S. companies) and (ii) the CRSP Total Return Index for NASDAQ
Computer and Data Processing Stocks. The comparison assumes $100 was invested
on December 31, 1996 in our common stock and in each of the two indices and
assumes reinvestment of dividends, if any.
A listing of the companies comprising each of the CRSP-NASDAQ indices used
in the following graph is available, without charge, upon written request. The
stock price performance depicted on the graph below is not necessarily
indicative of future stock price performance. The graph will not be deemed
incorporated by reference in any filing by us under the Securities Act of 1933
or the Securities Exchange Act of 1934, except to the extent that we
specifically incorporate the graph by reference.
-----------------
[CHART]
Comparison of Five-Year Cumulative Return
Among ZixIt Corporation,
CRSP-NASDAQ Stock Market (U.S.) and
CRSP-NASDAQ Computer and Data Processing Stocks
Measurement
Period ZixIt CRSP-NASDAQ CRSP-NASDAQ Computer and
(Year Ending) Corporation Stock Market (U.S.) Data Processing Stocks
------------- ----------- ------------------- ------------------------
12/31/96 $100.00 $100.00 $100.00
12/31/97 60.52 122.48 122.87
12/31/98 161.70 172.68 219.20
12/31/99 599.53 320.89 481.81
12/31/00 132.39 193.01 221.85
12/31/01 76.56 153.15 178.69
22
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee is comprised of three non-employee directors. The
Company believes that each member of the Audit Committee is an "independent
director," as defined in the Marketplace Rules of The Nasdaq Stock Market. The
Audit Committee oversees the Company's financial reporting process on behalf of
the Board of Directors, pursuant to its charter. The Audit Committee held six
meetings in 2001.
Management has the primary responsibility for the financial statements and
the reporting process including the systems of internal controls. In fulfilling
its oversight responsibilities, the Audit Committee reviewed the audited
financial statements in the Annual Report on Form 10-K/A with management,
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
Ernst & Young LLP, the Company's independent auditors, is responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and for
expressing an opinion on the conformity of those audited financial statements
with generally accepted accounting principles. The Audit Committee discussed
with the Company's independent auditors the overall scope and plans for their
respective audits. The Audit Committee meets with the independent auditors,
with and without management present, to discuss the results of their
examinations, their evaluations of the Company's internal controls, and the
overall quality of the Company's financial reporting. The Audit Committee
reviewed with the independent auditors their judgments as to the quality, not
just the acceptability, of the Company's accounting principles and discussed
with the independent auditors the matters required to be discussed by Statement
on Auditing Standards No. 61 (Communications with Audit Committees). In
addition, the Audit Committee has discussed with the independent auditors the
auditors' independence from management and the Company, including the matters
in the written disclosures required by the Independence Standards Board, and
considered the compatibility of non-audit services with the auditors'
independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board of Directors has
approved, that the audited financial statements be included in the Annual
Report on Form 10-K/A for the year ended December 31, 2001 for filing with the
Securities and Exchange Commission. The Audit Committee recommended, and the
Board of Directors has selected, Ernst & Young LLP as the Company's independent
auditors for 2002.
Michael E. Keane, Audit Committee Chair
James S. Marston, Audit Committee Member
Dr. Ben G. Streetman, Audit Committee Member
May 24, 2002
23
Our 2001 Annual Report to stockholders, including our Annual Report on Form
10-K/A (excluding exhibits), will be mailed together with this proxy statement.
The Annual Report does not constitute any part of the proxy solicitation
material.
PLEASE DATE, SIGN AND RETURN THE PROXY CARD AT YOUR EARLIEST CONVENIENCE IN
THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING IN THE UNITED STATES.
WE WOULD APPRECIATE THE PROMPT RETURN OF YOUR PROXY CARD, AS IT WILL SAVE THE
EXPENSE OF FURTHER MAILINGS.
By Order of the Board of Directors,
Ronald A. Woessner
Senior Vice President, General
Counsel & Secretary
Dallas, Texas
June 10, 2002
24
APPENDIX A
ZIXIT CORPORATION 2001 STOCK OPTION PLAN
(Amended and Restated as of July 29, 2002)
SECTION 1. Purpose
The purpose of the ZixIt Corporation 2001 Stock Option Plan (hereinafter
called the "2001 Plan") is to advance the interests of ZixIt Corporation
(hereinafter called the "Company") by strengthening the ability of the Company
to attract, on its behalf and on behalf of its Subsidiaries (as hereinafter
defined), and retain personnel of high caliber through encouraging a sense of
proprietorship by means of stock ownership.
SECTION 2. Definitions
"Board of Directors" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time-to-time.
"Committee" shall mean a committee of the Board of Directors comprised of at
least two directors or the entire Board of Directors, as the case may be.
Members of the Committee shall be selected by the Board of Directors. To the
extent necessary to comply with the requirements of Rule 16b-3, the Committee
shall consist of two or more Non-employee Directors. Also, if the requirements
of (S)162(m) of the Code are intended to be met, the Committee shall consist of
two or more "outside directors" within the meaning of (S)162(m) of the Code.
"Common Stock" shall mean the Common Stock of the Company, par value $.01
per share.
"Date of Grant" shall mean the date on which an Option is granted pursuant
to this 2001 Plan.
"Designated Beneficiary" shall mean the beneficiary designated by the
Optionee, in a manner determined by the Committee, to receive amounts due the
Optionee in the event of the Optionee's death. In the absence of an effective
designation by the Optionee, Designated Beneficiary shall mean the Optionee's
estate.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean the closing sale price (or average of the
quoted closing bid and asked prices if there is no closing sale price reported)
of the Common Stock on the date specified as reported by the Nasdaq National
Market, or by the principal national stock exchange on which the Common Stock
is then listed. If there is no reported price information for such date, the
Fair Market Value will be determined by the reported price information for
Common Stock on the day nearest preceding such date.
"Incentive Stock Option" shall mean a stock option granted under Section 6
that is intended to meet the requirements of Section 422 of the Code (or any
successor provision).
"Non-employee Director" shall have the meaning given such term in Rule 16b-3.
"Nonqualified Stock Option" shall mean a stock option granted under Section
6 that is not intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Nonqualified Stock Option.
"Optionee" shall mean the person to whom an option is granted under the 2001
Plan or who has obtained the right to exercise an option in accordance with the
provisions of the 2001 Plan.
A-1
"Rule 16b-3" shall mean Rule 16b-3 of the rules and regulations under the
Exchange Act as it may be amended from time-to-time and any successor provision
to Rule 16b-3 under the Exchange Act.
"Subsidiary" shall mean any now existing or hereafter organized or acquired
corporation or other entity of which fifty percent (50%) or more of the issued
and outstanding voting stock or other economic interest is owned or controlled
directly or indirectly by the Company or through one or more Subsidiaries of
the Company.
SECTION 3. Administration
The 2001 Plan shall be administered by the Committee. The Committee shall
have sole and complete authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the operation of the 2001 Plan as it
shall from time-to-time deem advisable, and to construe, interpret and
administer the terms and provisions of the 2001 Plan and the agreements
thereunder. The determinations and interpretations made by the Committee are
final and conclusive.
SECTION 4. Eligibility
All employees and non-employee consultants and advisors (other than
Non-employee Directors) who, in the opinion of the Committee, have the capacity
for contributing in a substantial measure to the successful performance of the
Company are eligible to receive Options under the 2001 Plan.
SECTION 5. Maximum Amount Available for Options
(a) The maximum number of shares of Common Stock in respect of which Options
may be made under the 2001 Plan shall be a total of 1,500,000 shares of Common
Stock. Of that amount, no participant may be granted Options for more than
600,000 shares of Common Stock in the aggregate during the term of the 2001
Plan. Options that expire, lapse or are cancelled or forfeited do not count
against the 1,500,000 share limit. Shares of Common Stock may be made available
from the authorized but unissued shares of the Company or from shares
reacquired by the Company, including shares purchased in the open market. In
the event that an Option is terminated unexercised as to any shares of Common
Stock covered thereby, such shares shall thereafter be again available for
award pursuant to the 2001 Plan.
(b) In the event that the Committee shall determine that any stock dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below fair market value, or other similar
corporate event affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under the 2001 Plan, then the Committee shall adjust appropriately
any or all of (1) the number and kind of shares which thereafter may be
optioned under the 2001 Plan and (2) the grant, exercise or conversion price
and/or number of shares with respect to the Options and/or, if deemed
appropriate, make provision for cash payment to an Optionee; provided, however,
that the number of shares subject to any Option shall always be a whole number.
SECTION 6. Stock Options
(a) Subject to the provisions of the 2001 Plan, the Committee shall have
sole and complete authority to determine the persons to whom Options shall be
granted, the number of shares to be covered by each Option, the option price
therefor and the conditions and limitations applicable to the exercise of the
Option.
(b) The Committee shall have the authority to grant Incentive Stock Options,
or to grant Nonqualified Stock Options, or to grant both types of options. In
the case of Incentive Stock Options, the terms and conditions of such grants
shall be subject to and comply with the Code and relevant regulations.
Incentive Stock Options to purchase Common Stock may be granted to such
employees of the Company or its Subsidiaries (including any
A-2
director who is also an employee of the Company or one of its Subsidiaries) as
shall be determined by the Committee. Nonqualified Stock Options to purchase
Common Stock may be granted to such eligible participants as shall be
determined by the Committee. Neither the Company nor any of its Subsidiaries or
any of their respective directors, officers or employees, shall be liable to
any Optionee or other person if it is determined for any reason by the Internal
Revenue Service or any court having jurisdiction that any Incentive Stock
Option granted hereunder does not qualify for tax treatment as an Incentive
Stock Option under the then-applicable provisions of the Code.
(c) The Committee shall, in its discretion, establish the exercise price at
the time each Option is granted, which in the case of Nonqualified Stock
Options, shall not be less than 100% of the Fair Market Value of the Common
Stock on the Date of Grant, or in the case of grants of Incentive Stock
Options, shall not be less than 100% of the Fair Market Value of the Common
Stock on the Date of Grant or such greater amount as may be prescribed by the
Code.
(d) Exercise
(1) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Committee may, in its sole discretion, specify
in the applicable grant or thereafter; provided, however, that in no event
may any Option granted hereunder be exercisable after the expiration of ten
years from the Date of Grant. The Committee may impose such conditions with
respect to the exercise of Options, including without limitation, any
relating to the application of federal or state securities laws, as it may
deem necessary or advisable.
(2) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefore is received by the
Company. Such payment may be made in cash, or its equivalent, or, if and to
the extent permitted by the Committee or under the terms of the applicable
agreement, by exchanging shares of Common Stock owned by the Optionee (which
are not the subject of any pledge or other security interest), or by a
combination of the foregoing, provided that the combined value of all cash
and cash equivalents and the Fair Market Value of any such Common Stock so
tendered to the Company, valued as of the date of such tender, is at least
equal to such option price.
If the shares to be purchased are covered by an effective registration
statement under the Securities Act of 1933, as amended, any Option may be
exercised by a broker-dealer acting on behalf of an Optionee if (a) the
broker-dealer has received from the Optionee instructions signed by the
Optionee requesting the Company to deliver the shares of Common Stock
subject to such Option to the broker-dealer on behalf of the Optionee and
specifying the account into which such shares should be deposited, (b)
adequate provision has been made with respect to the payment of any
withholding taxes due upon such exercise, and (c) the broker-dealer and the
Optionee have otherwise complied with Section 220.3(e)(4) of Regulation T,
12 CFR Part 220, or any successor provision.
(3) The Company, in its sole discretion, may lend money to an Optionee,
guarantee a loan to an Optionee or otherwise assist an Optionee to obtain
the cash necessary to exercise all or any portion of an Option granted under
the 2001 Plan.
(4) The Company shall not be required to issue any fractional shares upon
the exercise of any Options granted under this 2001 Plan. No Optionee nor an
Optionee's legal representatives, legatees or distributees, as the case may
be, will be, or will be deemed to be, a holder of any shares subject to an
Option unless and until said Option has been exercised and the purchase
price of the shares in respect of which the Option has been exercised has
been paid. Unless otherwise provided in the agreement applicable thereto, an
Option shall not be exercisable except by the Optionee or by a person who
has obtained the Optionee's rights under the Option by will or under the
laws of descent and distribution or pursuant to a "qualified domestic
relations order" as defined in the Code.
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(e) No Incentive Stock Options shall be exercisable (a) more than five years
(or such other period of time as from time-to-time provided in the
then-applicable provisions of the Code governing Incentive Stock Options) after
the Date of Grant with respect to an Optionee who owns ten percent or more of
the outstanding Common Stock (within the meaning of the Code), and (b) more
than ten years after the Date of Grant with respect to all other Optionees. No
Nonqualified Stock Options shall be exercisable more than ten years after the
Date of Grant.
(f) In no event shall any Option granted to any employee who is classified
as "non-exempt" under the Fair Labor Standards Act of 1938 be exercisable less
than six months after the Date of Grant, except in the case of death,
disability, retirement, a change in control or other circumstances permitted by
regulations under the Worker Economic Opportunity Act ("WEOA"). Grants to such
non-exempt employees shall not be based on pre-established performance
criteria, except as specifically permitted under the WEOA. Non-exempt employees
shall be notified of the terms of their Options in accordance with the WEOA,
and exercise of such Options must be voluntary.
SECTION 7. General Provisions
(a) The Company and its Subsidiaries shall have the right to deduct from all
amounts paid to an Optionee in cash (whether under the 2001 Plan or otherwise)
any taxes required by law to be withheld in respect of Option exercises under
the 2001 Plan. However, if permitted by the Committee or under the terms of the
applicable agreement, the Optionee may pay all or any portion of the taxes
required to be withheld by the Company or its Subsidiaries or paid by the
Optionee with respect to such Common Stock by electing to have the Company or
its Subsidiaries withhold shares of Common Stock, or by delivering previously
owned shares of Common Stock, having a Fair Market Value equal to the amount
required to be withheld or paid. The Optionee must make the foregoing election
on or before the date that the amount of tax to be withheld is determined. Any
such election is irrevocable and subject to disapproval by the Committee. If
the Optionee is subject to the provisions of Section 16(b) of the Exchange Act,
then any such election shall be subject to the restrictions imposed by Rule
16b-3.
(b) Each Option hereunder shall be evidenced in writing, delivered to the
Optionee, and shall specify the terms and conditions thereof and any rules
applicable thereto, including, but not limited to, the effect on such Option of
the death, retirement, disability or other termination of employment of the
Optionee and the effect thereon, if any, of a change in control of the Company.
(c) Unless otherwise provided in the agreement applicable thereto, no Option
shall be assignable or transferable except by will or under the laws of descent
and distribution or pursuant to a "qualified domestic relations order" as
defined in the Code, and no right or interest of any Optionee shall be subject
to any lien, obligation or liability of the Optionee.
(d) No person shall have any claim or right to be granted an Option.
Further, the Company and its Subsidiaries expressly reserve the right at any
time to terminate the employment of an Optionee free from any liability, or any
claim under the 2001 Plan, except as provided in any agreement entered into
with respect to an Option. Neither the 2001 Plan nor any Option granted
hereunder is intended to confer upon any Optionee any rights with respect to
continuance of employment or other utilization of his or her services by the
Company or by a Subsidiary, nor to interfere in any way with his or her right
or that of his or her employer to terminate his or her employment or other
services at any time (subject to the terms of any applicable contract). The
conditions to apply to the exercise of an Option in the event an Optionee
ceases to be employed by the Company or a Subsidiary for any reason shall be
determined by the Committee or specified in the written agreement evidencing
the Option.
(e) Subject to the provisions of the applicable Option, no Optionee or
Designated Beneficiary shall have any rights as a stockholder with respect to
any shares of Common Stock to be distributed under the 2001 Plan until he or
she has become the holder thereof.
(f) The validity, construction, interpretation, administration and effect of
the 2001 Plan and of its rules and regulations, and rights relating to the 2001
Plan, shall be determined solely in accordance with the laws of the State of
Texas (without giving effect to its conflicts of laws rules) and, to the extent
applicable, federal law.
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(g) The 2001 Plan was originally effective on May 15, 2001. No Options may
be granted under the 2001 Plan after May 14, 2011; however, all previous
Options issued that have not expired under their original terms or will not
then expire at the time the 2001 Plan expires will remain outstanding.
(h) Restrictions on Issuance of Shares
(1) The Company shall not be obligated to sell or issue any Shares upon
the exercise of any Option granted under the 2001 Plan unless: (i) the
shares pertaining to such Option have been registered under applicable
federal and state securities laws or are exempt from such registration; (ii)
the prior approval of such sale or issuance has been obtained from any state
regulatory body having jurisdiction; and (iii) in the event the Common Stock
has been listed on any exchange, the shares pertaining to such Option have
been duly listed on such exchange in accordance with the procedure specified
therefor. The Company shall be under no obligation to effect or obtain any
listing, registration, qualification, consent or approval with respect to
shares pertaining to any Option granted under the 2001 Plan. If the shares
to be issued upon the exercise of any Option granted under the 2001 Plan are
intended to be issued by the Company in reliance upon the exemptions from
the registration requirements of applicable federal and state securities
laws, the recipient of the Option, if so requested by the Company, shall
furnish to the Company such evidence and representations, including an
opinion of counsel, satisfactory to it, as the Company may reasonably
request.
(2) The Company shall not be liable for damages due to a delay in the
delivery or issuance of any stock certificates for any reason whatsoever,
including, but not limited to, a delay caused by listing, registration or
qualification of the shares of Common Stock pertaining to any Option granted
under the 2001 Plan upon any securities exchange or under any federal or
state law or the effecting or obtaining of any consent or approval of any
governmental body.
(i) The Board of Directors or Committee may impose such other restrictions
on the ownership and transfer of shares issued pursuant to the 2001 Plan as it
deems desirable; any such restrictions shall be set forth in the applicable
agreement.
(j) The Board of Directors may amend, abandon, suspend or terminate the 2001
Plan or any portion thereof at any time in such respects as it may deem
advisable in its sole discretion, provided that no amendment shall be made
without stockholder approval (including an increase in the maximum number of
shares of Common Stock in respect of which Options may be made under the 2001
Plan) if such stockholder approval is necessary to comply with any tax or
regulatory requirement or exchange listing rules, including for these purposes
any approval requirement that is a prerequisite for exemptive relief under
Section 16(b) of the Exchange Act.
(k) To preserve an Optionee's rights under an Option in the event of a
change in control of the Company or an Optionee's separation from employment,
the Committee in its discretion may, at the time an Option is made or any time
thereafter, take one or more of the following actions: (i) provide for the
acceleration of any time period relating to the exercise of the Option, (ii)
provide for the purchase of the Option, upon the Optionee's request, for an
amount of cash or other property that could have been received upon the
exercise or realization of the Option had the Option been currently exercisable
or payable, (iii) adjust the terms of the Option in a manner determined by the
Committee to reflect the change in control or to prevent the imposition of an
excise tax under section 280G(b) of the Code, (iv) cause the Option to be
assumed, or new rights substituted therefor, by another entity, or (v) make
such other provision as the Committee may consider equitable and in the best
interests of the Company.
AMENDED AND RESTATED as of July 29, 2002.
ZIXIT CORPORATION
By: _______________________________
Title: ____________________________
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APPENDIX B
ZIXIT CORPORATION
1999 DIRECTORS' STOCK OPTION PLAN
(Amended and Restated as of July 29, 2002)
SECTION 1. Purpose
The purpose of the ZixIt Corporation 1999 Directors' Stock Option Plan
(hereinafter called the "1999 Plan") is to advance the interests of ZixIt
Corporation, a Texas corporation (hereinafter called the "Company"), by
strengthening the ability of the Company to attract, on its behalf, and retain
External Directors (as defined below) of high caliber through encouraging a
sense of proprietorship by means of stock ownership.
SECTION 2. Definitions
"Adoption Date" shall mean January 28, 1999.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time-to-time.
"Committee" shall mean the entire Board of Directors, or if the
administration of the 1999 Plan has been delegated to a committee of the Board,
a committee selected by the Board and comprised of at least two directors. To
the extent necessary to comply with the requirements of Rule 16b-3, the
Committee shall consist of two or more Non-Employee Directors.
"Common Stock" shall mean the common stock of the Company, par value $.01
per share.
"Date of Grant" shall mean the date on which an Option is granted under the
1999 Plan.
"Designated Beneficiary" shall mean the beneficiary designated by the
Optionee, in a manner determined by the Committee, to receive amounts due the
Optionee in the event of the Optionee's death. In the absence of an effective
designation by the Optionee, Designated Beneficiary shall mean the Optionee's
estate.
"Eligible Director" shall mean an External Director who has served on the
Board at least 12 consecutive months as of the Date of Grant.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"External Director" shall mean a member of the Board who is not an employee
of the Company or a subsidiary.
"Fair Market Value" shall mean the closing sales price (or average of the
quoted closing bid and asked prices if there is no closing sales price
reported) of the Common Stock on the date specified as reported by the NASDAQ
Stock Market, or by the principal national stock exchange on which the Common
Stock is then listed. If there is no reported price information for such date,
the Fair Market Value will be determined by the reported price information for
Common Stock on the day nearest preceding such date.
"Grant Shares" shall mean, with respect to each Eligible Director for a
particular year, a number of shares calculated according to the following
formula: 1% of the number of the Company's outstanding Common Stock shares as
of the December 31 immediately preceding the Date of Grant divided by the
number of then-Eligible Directors. In no event may the number of Grant Shares
in any given year to any given Eligible Director exceed one-half of 1% of the
Company's outstanding Common Stock shares.
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"Non-Employee Director" shall have the meaning given such term in Rule 16b-3.
"Option" shall mean a nonqualified option to purchase shares of the
Company's Common Stock.
"Optionee" shall mean the person to whom an Option is granted under the 1999
Plan or who has obtained the right to exercise an Option in accordance with the
provisions of the 1999 Plan.
"Rule 16b-3" shall mean Rule 16b-3 of the rules and regulations under the
Exchange Act as it may be amended from time-to-time and any successor provision
to Rule 16b-3 under the Exchange Act.
SECTION 3. Administration
The 1999 Plan shall be administered by the Committee. The Committee shall
have sole and complete authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the operation of the 1999 Plan as it
shall from time-to-time deem advisable, and to construe, interpret and
administer the terms and provisions of the 1999 Plan and the agreements
thereunder. The determinations and interpretations made by the Committee are
final and conclusive and binding on all persons.
SECTION 4. Eligibility
All External Directors shall be eligible to receive awards of Options under
the 1999 Plan.
SECTION 5. Maximum Amount Available for Awards
Subject to the provisions of Section 9, the maximum number of shares of
Common Stock in respect of which Options may be granted under the 1999 Plan
shall be 975,000 shares of Common Stock. Shares of Common Stock may be made
available from authorized but unissued shares of the Company or from shares
reacquired by the Company, including shares purchased in the open market. In
the event that an Option is terminated unexercised as to any shares of Common
Stock covered thereby, such shares shall thereafter be again available for
award pursuant to the 1999 Plan.
SECTION 6. Stock Options
(a) During the term of the 1999 Plan, on the day that an External Director
is first appointed or elected to the Board, such director shall be granted
nonqualified Options to purchase 25,000 shares of the Company's Common Stock.
Also, during the term of the 1999 Plan, on the first business day of January of
each year after the Adoption Date, each Eligible Director shall be granted
Options to purchase the Grant Shares. Each Eligible Director serving on the
Board on the Adoption Date shall be granted Options to purchase the Grant
Shares, effective as of the Adoption Date. Directors that receive the Grant
Shares are not eligible to receive a directors' retainer cash payment, although
they are eligible to be reimbursed for expenses related to Board activities.
(b) All Options granted under the 1999 Plan prior to shareholder approval of
the 1999 Plan shall be subject to the approval of the 1999 Plan by the
shareholders of the Company.
(c) The exercise price of the 25,000 share option grants shall be 100% of
the Fair Market Value of the Common Stock on the Date of Grant. The exercise
price for the Grant Shares shall be 120% of the Fair Market Value of the Common
Stock on the Date of Grant. The exercise price of any outstanding Options may
not be re-priced without the approval of the Company's shareholders (obtained
in accordance with applicable law), given in each specific instance.
(d) Each Option hereunder shall be evidenced in writing, delivered to the
Optionee, and shall be exercisable at such times and subject to such terms and
conditions as specified in the applicable grant and agreement, subject to the
following principles:
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(1) the 25,000 share option grants shall vest six months from the Date of
Grant;
(2) the Grant Shares shall vest annually and pro-rata on each of the
first three anniversaries of the Date of Grant; provided, that, the vesting
will accelerate if (a) a Change in Control (as defined in the applicable
agreement) of the Company occurs or (b) the director is removed by vote of
the shareholders other than for Cause (as defined in the applicable
agreement); and
(3) the Options may not be exercised after the tenth anniversary of the
Date of Grant.
The Committee may impose such conditions with respect to the exercise of
Options (that are consistent with the foregoing principles), including without
limitation, any relating to the application of federal or state securities
laws, as it may deem necessary or advisable.
(e) No shares shall be delivered pursuant to any exercise of an Option until
cash payment in full of the option price therefor is received by the Company.
If the shares to be purchased are covered by an effective registration
statement under the Securities Act of 1933, any Option may be exercised by a
broker-dealer acting on behalf of an Optionee if (a) the broker-dealer has
received from the Optionee instructions signed by the Optionee requesting the
Company to deliver the shares of Common Stock subject to such Option to the
broker-dealer on behalf of the Optionee and specifying the account into which
such shares should be deposited, (b) adequate provision has been made with
respect to the payment of any withholding taxes due upon such exercise, and (c)
the broker-dealer and the Optionee have otherwise complied with Section
220.3(e)(4) of Regulation T, 12 CFR Part 220, or any successor provision. The
Company shall have the right to deduct from all amounts paid to an Optionee in
cash (whether under the 1999 Plan or otherwise) any taxes the Company withholds
in respect of Options under the 1999 Plan.
(f) The Company shall not be required to issue any fractional shares upon
the exercise of any Options granted under the 1999 Plan. No Optionee or such
Optionee's legal representatives, legatees or distributees, as the case may be,
will be, or will be deemed to be, a holder of any shares subject to an Option
unless and until said Option has been exercised and the purchase price of the
shares in respect of which the Option has been exercised has been paid. Unless
otherwise provided in the agreement applicable thereto, an Option shall not be
exercisable except by the Optionee or by a person who has obtained the
Optionee's rights under the Option by will or under the laws of descent and
distribution or pursuant to a "qualified domestic relations order" as defined
in the Code, and no right or interest of any Optionee shall be subject to any
lien, obligation or liability of the Optionee.
SECTION 7. 1999 Plan Amendments
The Board may amend, abandon, suspend or terminate the 1999 Plan or any
portion thereof at any time in such respects as it may deem advisable in its
sole discretion, provided that no amendment shall be made without shareholder
approval if such amendment is material or if shareholder approval is necessary
to comply with any tax or regulatory requirement.
SECTION 8. Restrictions on Issuance of Options and Option Shares
The Company shall not be obligated to issue any shares upon the exercise of
any Option granted under the 1999 Plan unless: (1) the shares pertaining to
such Option have been registered under applicable securities laws or are exempt
from such registration; (2) if required, the prior approval of such sale or
issuance has been obtained from any state regulatory body having jurisdiction;
and (3) in the event the Common Stock has been listed on any exchange, the
shares pertaining to such Option have been duly listed on such exchange in
accordance with the procedure specified therefor. The Company shall be under no
obligation to effect or obtain any listing, registration, qualification,
consent or approval with respect to shares pertaining to any Option granted
under the 1999 Plan. If the shares to be issued upon the exercise of any Option
granted under the 1999 Plan are intended to be issued by the Company in
reliance upon the exemptions from the registration requirements of applicable
federal and state securities laws, the recipient of the Option, if so requested
by the Company, shall furnish to the
B-3
Company such evidence and representations, including an opinion of counsel
satisfactory to it as the Company may reasonably request.
The Company shall not be liable for damages due to a delay in the delivery
or issuance of any stock certificates for any reason whatsoever, including, but
not limited to, a delay caused by listing, registration or qualification of the
shares of Common Stock pertaining to any Option granted under the 1999 Plan
upon any securities exchange or under any federal or state law or the effecting
or obtaining of any consent or approval of any governmental body.
The Committee may impose such other restrictions on the ownership and
transfer of shares issued pursuant to the 1999 Plan as it deems desirable; any
such restrictions shall be set forth in the agreement applicable thereto.
SECTION 9. Adjustment to Shares
In the event that the Committee shall determine that any stock dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below Fair Market Value or other similar
corporate event affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under the 1999 Plan, then the Committee shall adjust appropriately
any or all of (a) the number and kind of shares that thereafter may be optioned
under the 1999 Plan, (b) the number and kind of shares subject of Options and
(c) the exercise price with respect to any of the foregoing and/or, if deemed
appropriate, make provision for cash payment to an Optionee or a person who has
an outstanding Option; provided, however, that the number of shares subject to
any Option shall always be a whole number.
SECTION 10. Effective Date; Term; Effect on 1996 Plan
The 1999 Plan was originally effective as of the Adoption Date. No Options
may be granted under the 1999 Plan after January 27, 2009; however, all
previously granted Options that have not expired under their original terms or
will not then expire at the time the 1999 Plan expires will remain outstanding.
The 1999 Plan supersedes the Company's 1996 Directors' Stock Option Plan.
SECTION 11. General Provisions
(a) Neither the 1999 Plan nor any Option granted hereunder is intended to
confer upon any Optionee any rights with respect to continuance of the
utilization of his or her services by the Company, nor to interfere in any way
with his or her right or that of the Company to terminate his or her services
at any time (subject to the terms of any applicable contract, law, regulation,
and the articles and bylaws of the Company).
(b) No Optionee or Designated Beneficiary shall have any rights as a
shareholder with respect to any shares of Common Stock to be distributed under
the 1999 Plan until he or she has become the holder thereof.
(c) The validity, construction, interpretation, administration and effect of
the 1999 Plan and of its rules and regulations, and rights relating to the 1999
Plan, shall be determined solely in accordance with the laws of the State of
Texas (without giving effect to its conflicts of laws rules) and, to the extent
applicable, federal law.
AMENDED AND RESTATED as of July 29, 2002.
ZIXIT CORPORATION
By: _______________________________
Title: ____________________________
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Proxy - ZixIt Corporation
BOARD OF DIRECTORS PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
AT THE CITYPLACE CONFERENCE CENTER, HOUSTON ROOM
2711 NORTH HASKELL AVENUE, SECOND FLOOR, DALLAS, TEXAS 75204
9:00 a.m. (registration at 8:30 a.m.), Central time, Monday, July 29, 2002
The undersigned stockholder of ZixIt Corporation hereby appoints John A. Ryan
and Steve M. York, or either of them, as proxies, each with full power of
substitution, to vote the shares of the undersigned at the above-stated annual
meeting and at any postponement(s) or adjournment(s) thereof.
THIS PROXY IS SOLICITED ON BEHALF OF OUR BOARD OF DIRECTORS AND WILL BE VOTED
ACCORDING TO YOUR DIRECTIONS MADE ON THE REVERSE SIDE. IF YOU DO NOT VOTE ON
PROPOSALS 1, 2, 3 OR 4, THIS PROXY WILL BE VOTED "FOR" THOSE PROPOSALS. THE
PROXY HOLDERS WILL USE THEIR DISCRETION WITH RESPECT TO ANY OTHER MATTER THAT
PROPERLY COMES BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF. THIS PROXY IS
REVOCABLE AT ANY TIME BEFORE IT IS EXERCISED.
PLEASE VOTE, SIGN AND DATE ON THE REVERSE SIDE OF THIS PROXY CARD
AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
ZixIt Corporation
Use a black pen. Print in CAPITAL letters inside the grey areas as shown in this
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example.
[A/B/C] [1/2/3] [X]
--------------------------------------------------------------------------------
Annual Meeting Proxy Card
--------------------------------------------------------------------------------
A. Election of Directors
1. The Board of Directors recommends a vote FOR the listed nominees.
For Withhold
01 David P. Cook / / / /
02 Michael E. Keane / / / /
03 James S. Marston / / / /
04 John A. Ryan / / / /
05 Antonio R. Sanchez, Jr. / / / /
06 Dr. Ben G. Streetman / / / /
B. Issues
The Board of Directors recommends a vote FOR the following resolutions:
For Against Abstain
2. Amendment to ZixIt Corporation's Articles of Incorporation. / / / / / /
3. Amendment to ZixIt Corporation's 2001 Stock Option Plan. / / / / / /
4. Amendment to ZixIt Corporation's 1999 Directors' Stock / / / / / /
Option Plan.
C. Authorized Signatures - Sign Here - This section must be completed for your
instructions to be executed.
NOTE: This proxy will be voted in the discretion of the proxy holders on any
other business that properly comes before the meeting or any adjournment
thereof, hereby revoking any proxy or proxies given by the undersigned prior to
the date hereof.
By executing this proxy, you acknowledge receipt of ZixIt Corporation's 2001
Annual Report, Notice of 2002 Annual Meeting of Stockholders and Proxy Statement
and revoke any proxy or proxies given by you prior to the date hereof.
Please sign EXACTLY as your name(s) appear(s) on this proxy card. Joint owners
must EACH sign personally. When signing as attorney, trustee, executor,
administrator, guardian or corporate officer, please give your FULL title as
such. If a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Signature 1 Signature 2 Date (dd/mm/yyyy)
____________________________________ ____________________________________ _____/_____/_____________